The Highs and Lows of Dr. Z's Daimler Tenure

(Bloomberg) -- Dieter Zetsche plans to step down next year as chief executive officer of Daimler AG, the inventor of the automobile. During 12 years in charge, the executive — easily recognizable by his trademark walrus mustache — has left an indelible mark on the German corporate icon.

He’ll hand over the reins to Ola Kallenius and leave Daimler a more focused company after the tumultuous efforts by his predecessor Juergen Schrempp to create a global auto giant. But Zetsche’s tenure wasn’t always smooth, with financial missteps and a string of profit warnings, including one in June blamed on trade headwinds. While the world’s largest maker of luxury cars and commercial vehicles is leaner, it still faces significant challenges posed by the transition to self-driving, electric vehicles. 

Here's a look at some of the 65-year-old's highs and lows, since taking charge of Daimler in 2006:

Highs

Casting Off Chrysler | Zetsche rose to prominence as Chrysler pitch man Dr. Z, while trying to turn around the U.S. manufacturer. But DaimlerChrysler never overcame the cultural differences that plagued the cooperation between the Detroit carmaker and Mercedes-Benz. In the end he cut ties, ceding the remaining holding just before Chrysler filed for bankruptcy in 2009. The unwinding of the ill-fated merger was the end to Daimler’s efforts to play a role in the mass-market car segment. Zetsche personally underscored the importance of luxury cars by overseeing Mercedes alongside his role as the group’s CEO. That structure will be retained when Kallenius takes charge.

Airbus Adieu | Mercedes-Benz’s three-pointed star stands for the founders’ ambitions on land, sea and air. Part of that legacy handed Daimler a 15 percent stake and the role of Germany’s representative in Airbus SE. But the holding in the aviation and defense company was an awkward fit for a maker of luxury cars and commercial vehicles. Zetsche bid farewell in 2013 with the sale of its remaining 7.5 percent stake, raising money to invest in Daimler’s auto business.

Beating BMW | Zetsche’s crowning achievement came in 2016 when Mercedes once again became the world’s best-selling luxury-car brand, a title defended ever since. The push to beat archrival BMW for the first time in more than a decade looked doomed just a few years earlier. At the time, Mercedes had dropped to third place behind Audi, and Zetsche’s efforts to make the brand younger and hipper appeared be going nowhere. But then came an aggressive array of peppy, small cars like the GLA crossover and CLA compact sedan. Zetsche himself embodied the brand’s new verve with a style makeover, including sneakers, skinny jeans and no ties.

Break Up | Zetsche’s final act will be to restructure Daimler into three legally separate units comprising cars, commercial vehicles and services, such as car-sharing unit Car2Go and ride-hailing app MyTaxi. Critics of Daimler have long questioned the rationale of keeping together luxury sedans and 40-ton highway haulers. The new corporate structure opens the door to eventual spinoffs or mergers and makes Daimler more flexible when confronting the challenges facing the auto industry. 

Lows

Diesel Deceit | Daimler was caught up in the scandal over rigged diesel vehicles, with the German government accusing the company of crossing the line on its emissions setups. That’s led to a recall of 774,000 cars in Europe and a blow to the company’s reputation. What might be more damaging is that it’s contributing to a customer pullback on diesel cars, which are profitable and help the company lower carbon-dioxide emissions. That puts Daimler in a bind to meeting increasingly tight environmental rules in Europe starting in 2021. 

Money for Nothing | Slow to react to the fallout from the financial crisis, Zetsche turned to Abu Dhabi’s Aabar Investments PJSC for an emergency cash injection in a discounted share sale in March 2009. The sovereign wealth fund was supposed to be the company’s sought-after anchor investor, but the partnership didn’t last. Aabar unloaded its stake in 2012, cashing out after nearly doubling its money. Daimler will be hoping for better luck with Chinese billionaire Li Shufu. The owner of Geely and Volvo became the company’s largest shareholder with a surprise acquisition of a 9.7 percent stake in February. 

Slow Charge | While Zetsche made a tidy profit for Daimler by buying shares in Tesla Inc. in 2009 and then selling them in 2014, he’s been less successful in rolling out the company’s own electric vehicles. After previous tentative efforts with conversions of existing models, a lot is riding on the new EQ line of electric cars. With diesel’s decline blowing a hole in Daimler’s emissions strategy, there’s a whiff of desperation in the push that’s costing the company more than $12 billion.

Not So Smart | Daimler has struggled to do much with its urban Smart brand. Various efforts to expand it beyond its trademark tiny two-seater have fallen flat. An effort to add a new four-seater was the driving force behind a partnership with Renault SA, with little effect. Daimler’s latest strategy for Smart calls for the brand to become electric only. Its ultimate purpose now seems to be offsetting the hefty emissions of cash cows like the $124,000 G-Class wagon. Daimler also struggled with the Maybach brand, which was meant to rival Rolls-Royce and Bentley in the ultra-luxury segment. It’s now been reduced to the badge for luxury trim lines for Mercedes models.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net, Chad ThomasAnthony Palazzo

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