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.
Q: The Detroit show puts a clear emphasis on green technology, such as your Concept Blue-Zero electric vehicle. How much of this is just image, and how much will we really see on the road?
Zetsche: We will see combustion engines for a long time. On the other hands, we are talking about millions (of Euros) we are investing each year in green technology and we believe we are at the beginning of a paradigm shift where these technologies will become more and more relevant in the showroom. You will see ups-and-downs (in consumer demand) correlating with fuel prices, more than ecological concerns, but the trend is the same.
Q: Are you surprised by the long life of the internal combustion engine?
Zetsche: I’m an engineer and am extremely impressed by the speed of development of the internal combustion engine after 120 years. You look at our new diesel, which is delivering the equivalent of 44 miles per gallon in an E-Class sedan, I would not have thought that possible a few years ago. But, such drivelines get more expensive, as well. All of this doesn’t come for free. But it still gives us tremendous potential, and you add hybrids and it gives us potential that is tremendous.
Q: Will you continue your hybrid development joint venture with BMW, Chrysler and General Motors?
Zetsche: We are at the point of execution of this technology in Mercedes vehicles. We have made no decision about future generations of this technology. We very much enjoy this cooperation. We have learned a lot, so in any case, it has been a very good situation so far, and I hope it will (continue) but no decision has been made so far.
Q: Can you forecast where you see the automotive market going in the next decade?
Zetsche: When I look at forecasts of 10 years ago, I do not see much similarity to today’s reality. It’s clear that the industry can’t expect big growth in developed markets, so it’s under pressure and that, typically, leads to consolidation. But there’s an emotional element to the auto industry, and so, in many cases where consolidation of brands should occur, it hasn’t, because of bailouts or interventions. Today (though) I see more brands talking about the opportunity to improve by buying another brand. Talking about us, I don’t see interesting opportunities for consolidation. We’ve been there. Our company is strong enough to go through tough times on our own.
Q: Doesn’t Daimler need a high-volume brand, though?
Zetsche: It’s the wrong perspective to look at this from a volume of sales basis. It’s not unit volume, it’s revenues. When it comes, for instance, to R&D budget, we are second to none. We were there and had 2.5 million more units of production. It didn’t make us stronger.
Q: There have been claims, by Cerberus Capital Management (which purchased approximately 80 percent of Chrysler) that Daimler misled them. How do you respond?
Zetsche: We are, of course, totally convinced this allegation is without any substance. There was a very long, extremely severe due diligence period (done) by a partner with thousands of experienced people in the field.
Q: The new Hyundai Genesis was named North American Car of the Year, during the auto show, and that seems to suggest there are big changes occurring in the very definition of luxury.
Zetsche: I have all the respect for the progress they have made, over time, but I don’t think many customers are going to make a decision on whether to buy a Hyundai or a Mercedes. I think the vast majority of buyers perceive (luxury) to mean the three German brands, maybe Lexus and Infiniti and maybe Cadillac.
Q: Yet, isn’t that the same thing that was said when Japanese luxury brands, like Lexus, got into the market?
Zetsche: Lexus has had a remarkable success story, but it is very much limited to a few models. This might change. We are very much aware of our competitors and we continue to try to do better, and build on our strength, rather than worry about others.
Q: You said you are “cautiously optimistic” about 2009, so when do you see a recovery?
Zetsche: We just don’t know. We know we’re not there yet. I would expect luxury car sales to improve sooner than entry or mainstream car sales.