The Mercedes-Benz EQ Silver Arrow concept vehicle is displayed during the 2018 Pebble Beach Concours d’Elegance in Pebble Beach, California, U.S. (Photographer: David Paul Morris)

Mercedes Gets The Chance To Do Some Truly Epic Stuff

BloombergOpinion

(Bloomberg Opinion) -- Dieter Zetsche, who announced Wednesday that he’s stepping down as Daimler AG’s chief executive next year, is an understated yet consummate corporate showman. Known in the U.S. as “Dr Z” from his days running Chrysler, his wacky white mustache and penchant for fashionable trainers helped him stand out from Germany’s bland cohort of business leaders. Last year he was photographed wearing a T-shirt bearing the oh-so-Silicon Valley entreaty: “Do Epic Sh!t.”

His successor Ola Kallenius – an insider, long groomed for the top at Daimler – would do well to take that slogan seriously.

In fairness, Zetsche himself has done plenty of big stuff during his 42 years at Daimler. He unwound the disastrous Chrysler merger, overhauled Mercedes-Benz’s fusty image with sporty new models and made the company a force in China. He hasn’t neglected technology either. Daimler is a leader in autonomous driving, is rolling out several electric vehicles, and is big in car-sharing with a taxi app that’s a good substitute for Uber.

The car and truck-maker generated 164 billion euros ($193 billion) of sales last year and more than 10 billion euros of net income. The ongoing investigations related to the company’s diesel emissions are the one big blot on his copybook.

And yet shareholders don’t give it any credit for the tech stuff. Daimler’s derisory stock market valuation (including net debt, it’s valued at just two times estimated Ebitda) shows investors think the epic sh!t is happening elsewhere. At places like Waymo, Google’s  self-driving car project.

Zetsche all but acknowledged this recently, saying his company’s self-driving and ride-hailing activities “are not valued at typical multiples you see in standalone companies of that kind.”

He cast an envious eye too on the wildly lavish valuations ascribed to Ferrari and maybe Aston Martin soon. “We have activities in our company which certainly compare in the markets very well to that. I don't think they are looked at in the same manner.”

Another part of the business that isn’t as loved as it might be is Daimler’s trucks unit, the world’s largest. Rival truck-maker Volvo AB has an enterprise value that’s worth about 8 times its forward earnings, a multiple beyond the wildest dreams of the Daimler group.

It’s a pity then, that the German giant has applied the brakes so far to any plan that might unlock value from its sprawling portfolio. True, it has announced a big corporate overhaul that will establish the car, trucks and mobility divisions as separate legal entities by January 2020. But there’s no word on whether that will pave the way for separate stock market listings, as Volkswagen AG is doing with its truck unit.

If Kallenius wants to be a hero to investors, it’s an obvious path to take.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.

©2018 Bloomberg L.P.