Posts Tagged ‘Daimler-Chrysler’

Daimler Under Pressure as Costs Soar

Maker says it needs to pump cash into R&D.

by on Feb.18, 2011

Daimler's turnaround was "impressive," asserted CEO Dieter Zetsche, but some disagree.

Despite major league improvements in earnings during 2010, analysts fear Daimler AG’s turnaround is looking ragged around the edges. Analysts fear the company’s newly-announced earnings before interest and taxes fell well short of expectations and Daimler’s ability to control its costs is growing suspect.

Dieter Zetsche, chairman of Daimler’s management board, said part of the reason for the poor shape of the so-called EBIT number was the big increase in spending on research and development.

Part of the reason for the rather dramatic rise in research and development spending is Daimler desire to maintain a strong position.  And a big part of that has to do with maintaining a strong presence in the Chinese market – which means honoring the Chinese government’s desire for electric-powered vehicles.

Up until recently, Mercedes-Benz has consistently turned up its nose at EVs and countered that it was a leader in diesel technology.  Not surprisingly it’s also been something of a laggard in battery technology.

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Daimler’s management, however, has undergone a conversion on the road to Beijing and is now scrambling to catch up to mollify China’s gatekeepers.

The price tag, though, is bound to increase dramatically in the near future.  And adding to the R&D budget pressures is the need to retool the long-struggling Smart car brand.  (Daimler moves to take the Smart brand’s U.S. franchise away from Penske Automotive. Click Here for details.)


Daimler Loses its German Arrogance?

On the eve of a contentious shareholder meeting, the traditional executive swagger is largely absent.

by on Apr.07, 2009

If E fstands or excessive in the current populist environment Daimler is in trouble.

If E continues to stand for "excessive" in the current populist environment Daimler is in trouble.

The old Daimler-Benz and the old DaimlerChrysler had a certain swagger that missing these days at Daimler AG. Certainly the worldwide Great Recession and the collapse of auto markets have spooked carmakers from one end of the globe to the other. After speaking with Daimler officials ahead of the company’s annual shareholders meeting, it’s apparent that the big automaker has been chastened by the events of the past two years.

For years, Daimler and its executives from the Mercedes-Benz unit believed the inherent appeal of German luxury vehicles left the company virtually immune to the recessions and economic downturns. This time it’s different, however. Mercedes-Benz sales have dropped more than 20% during the first quarter and brave talk about making up the fall in the U.S. with new sales in China and Russia have turned out to be so much smoke. The downturn in the U.S. also has sidetracked Mercedes’ ambitious plans to make American consumers fall in love with its expensive diesel engines.

But what’s really got Daimler executives spooked now is that the critical U.S. market could undergo a fundamental shift away from the kind of luxury cars that had characterized the “master of the universe culture” that dominated Wall Street from the early 1980s right up until the collapse of Lehman Brothers last September. A New York Times/CBS poll indicates 74% of all Americans think anyone making more than $250,000 per year should pay more taxes, and in this kind of environment luxury buyers are bound to become a bit more cautious, and perhaps thinking the unthinkable — maybe a Lincoln isn’t so bad after all.

Thus, Daimler has limped through the winter with factories running on short work weeks. Moreover, the automaker is expecting to report a loss for the first quarter even though the German government, through one of the country’s ubiquitous social programs, is helping pick up some of the cost of keeping plants running during the recession. Daimler also announced last week more that more production cuts are planned. (more…)

Arab Investors to Dominate Daimler

Abu Dhabi government investment fund to become maker’s largest shareholder

by on Mar.23, 2009

Zetsche: It was either pry open an ATM or sell a stake to Abu Dhabi.

Zetsche: It was either pry open an ATM or sell a stake to Abu Dhabi.

An investment fund controlled by the government of Abu Dhabi is now the biggest shareholder in Mercedes-Benz’s parent company, Daimler AG.

Aabar Investment PJSC is spending $2.72 billion for a 9.1 percent stake in the German company.  Unlike many Mideast sovereign wealth funds, some shares in Aabar are publicly traded.  But in a series of recent steps, the government has been steadily increasing its stake in the investment firm.

“We are delighted to welcome Aabar as a new major shareholder that is supportive of our corporate strategy,” Daimler Chief Executive Officer said in the statement. “We look forward to working together to pursue joint strategic initiatives.”

“Daimler is an iconic brand and a financially strong company with a reputation for excellence worldwide,” said Aabar Chairman Khadem al-Qubaisi, in a statement. “We are delighted to have the opportunity to make this investment and are excited by the commercial potential of our partnership.”

The Daimler investment appears to be Aabar’s biggest foreign move to date.  Last December, it bought the Swiss-based wealth management unit of the struggling American International Group, or AIG, for $273 million – a deal in which it also agreed to assume about $90 million in debt.


Daimler Loses the Air of Invincibility

Fourth-quarter slump takes dismal toll.

by on Feb.17, 2009

Daimler CEO Dieter Zetsche

Daimler CEO Dieter Zetsche

The global recession has punctured the air of invincibility at Daimler AG, as the German automaker reported a 12 percent drop in revenue and a $1.95 billion loss in the fourth quarter.

The troubled fourth-quarter sliced the company’s net profit to $1.8 billion for 2008 from more than $5 billion as the company’s overall revenue dropped by 1 percent, according to the company’s annual financial report. The Mercedes-Benz division, the company’s flagship, lost money in the fourth and the company also reported that its wound up the year with negative cash flow of almost $5 billion, as the economic downturn took a heavy toll on Daimler’s resources.

“During the first half of 2008, we proved how well we perform under normal economic conditions. Many of our business operations were headed for very good results,” said Daimler Chief Executive Officer Dieter Zetsche.


Q&A: Dieter Zetsche

Slumping sales, new competition – and why the internal combustion engine just won’t die.

by on Jan.21, 2009

Daimler CEO Dieter Zetsche

Daimler CEO Dieter Zetsche

It takes little more than a glance to realize Dieter Zetsche isn’t your typical auto industry executive. Sure, he wears the appropriately tailored suits, and can rattle off facts and figures as well as any other automotive CEO. But there’s also the bushy, trademark moustache, bald dome and twinkling eyes that hint at the quick sense of humor that was the centerpiece of a series of TV ads featuring Zetsche during his tenure as CEO of Chrysler Corp.

Running that struggling U.S. operation was one of the toughest challenges of his long career, he admits, and it wasn’t much easier to approve the break-up of Chrysler’s nine-year marriage to Germany’s Daimler. But the 55-year-old Zetsche has faced plenty of challenges since taking the reigns from the controversial Juergen Schrempp, the architect of a vast expansion of the Daimler empire, which included the Chrysler deal. Since returning to Germany, Zetsche has returned to basics. Though Daimler still holds a stake in the parent of Airbus, it has re-emphasized its roots as an automaker, with brands like Smart and the flagship Mercedes-Benz.

Like virtually every automaker, Mercedes has been hit hard by the global automotive downturn; indeed, the economic turmoil has had an unusually large impact on the luxury car market. But Zetsche remains “”carefully optimistic” that Mercedes will continue to be one of the globe’s premier marques, and emerge from the recession stronger than ever. Paul A. Eisenstein caught up with the Turkish-born executive recently, and shared this conversation…

Q: Dr. Zetsche, how do you see the year just ended?

Zetsche: Two thousand eight had two faces, two parts. The first half, we were running pretty much at the levels we set for ourselves, and then, during the second half, the world changed all together, as world markets declined, month after month, and always worse than forecast. But we did reasonably well, especially when compared to 2007, which was a record year for us. We can’t spend all time guesstimating how the markets will develop (in 2009), so we will focus on our strength, which is product, and have major products ready for launch, such as the new E-Class. There is a paradigm shift towards lower CO2, so we are looking at this crisis as an opportunity. So, we are carefully optimistic about the future of our company.


Will Fiat Deal Save Chrysler?

Proposed alliance could save money, add global reach

by on Jan.20, 2009

Chrysler turns to the Italians for salvation

Chrysler turns to the Italians for salvation

The perennially-troubled Chrysler LLC will form a new “global strategic alliance” with the Italian automaker that often has words like “weak,” and “troubled,,” associated with its own name, Fiat s.P.a. Barring problems with federal overseers, who must review the proposed deal – and give a sign-off on Chrysler’s business plan – the two automakers’ alliance could come together in April.

The announcement, which first reported on yesterday, comes nearly 20 years after Chrysler and Fiat called off a proposed, trans-Atlantic merger. The new deal will be significantly less far-reaching in scope, though it could still play a critical role in determining the companies’ long-term viability, according to industry observers.

The proposed deal, said a press release, “would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities” stemming, among other things, through increased economies of scale.

One of the more telling comments in the release, which seems to underscore just had badly understaffed Chrysler has become as it has been forced to pare back to survive, notes that, “Fiat would provide management services supporting Chrysler’s submission of a viability plan to the U.S. Treasury as required.”


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