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Daimler Extends Zetsche as CEO as Bernhard to Run Trucks

February 21, 2013

Daimler AG (DAI) extended Chief Executive Officer Dieter Zetsche’s term and named manufacturing manager Wolfgang Bernhard to run the truck unit in a possible step to the top job at the world’s third-biggest luxury-car maker.

Zetsche’s contract as CEO will be prolonged until the end of 2016, Stuttgart, Germany-based Daimler said today in a statement. Bernhard will become head of the Daimler Trucks division, the world’s largest maker of heavy vehicles, switching roles with Andreas Renschler, who will oversee production and purchasing at Mercedes-Benz cars and vans.

“The chances that Bernhard could succeed Zetsche as CEO have increased further with today’s announcement,” Roman Mathyssek, a Frankfurt-based analyst at IHS Global Insight, said by phone. “There’s an unwritten law at Daimler that the CEO has to prove himself at the truck division.”

Zetsche vowed 1 1/2 years ago to return the Mercedes brand to its No. 1 rank among luxury carmakers. Since then, the division has fallen further behind Munich-based Bayerische Motoren Werke AG (BMW) and Volkswagen AG (VOW)’s Audi unit in global sales. BMW overtook Mercedes as the world’s biggest luxury-car brand in 2005. Audi, building on a presence in China, has been in second place since 2011.

Shorter Contract

Zetsche’s three-year contract extension is shorter than the five-year renewals common in German industry. Volkswagen prolonged CEO Martin Winterkorn’s term by five years in 2011 and BMW approved a similar extension for CEO Norbert Reithofer in September 2010.

“The supervisory board is acting in accordance with good corporate governance rules, which imply that board members who are 60 years old or turn 60 during their tenure get a contract extension of three years instead of five,” Joerg Howe, a Daimler spokesman, said in a telephone interview. Zetsche turns 60 in May.

The shares dropped 1.04 euros, or 2.3 percent, to 44.09 euros at the close of trading in Frankfurt today. The stock has gained 6.7 percent this year, valuing the German company at 47.1 billion euros ($62.2 billion).

Bernhard, 52, will be taking charge of the Daimler division that includes the Freightliner commercial-vehicle brand in the U.S. and Fuso in the Japan, in addition to Mercedes-Benz heavy vehicles built in Europe and Brazil. He returned to Daimler in 2009 after a five-year absence that included a stint at VW, and took the Mercedes car division’s production post in 2010. Zetsche and his predecessor Juergen Schrempp both worked in the commercial-vehicles division before becoming CEO.

Swapping Jobs

Renschler, 54, has overseen the truck business since October 2004, managing the division’s investments in emerging markets such as Russia and India. His work at the Mercedes car unit, which Zetsche leads, will involve implementing efficiency measures at a division that has a goal of cutting 2 billion euros in spending by 2014.

As the European car market heads into a sixth consecutive annual decline, Daimler is forecasting that earnings before interest and taxes from ongoing business in 2013 will remain unchanged from last year, when operating profit dropped 10 percent to 8.1 billion euros.

“A three-year contract makes sense,” said Daniel Schwarz, an analyst at Commerzbank AG in Frankfurt. “If Mercedes is going to close the gap to BMW and Audi, then results of Zetsche’s efforts should be evident by then. A five-year contract could have been seen critically by some investors.”

New Models

Zetsche’s strategy at Mercedes includes rolling out 13 new vehicles without predecessor models over the next eight years and fixing a disjointed sales strategy in China. He’s targeting an increase in profit starting next year, while balancing the costs of adding models, such as the CLA coupe and a compact sport-utility vehicle, with the spending-reduction targets.

The CEO joined Daimler in 1976 and has since held various positions at the manufacturer’s car and commercial-vehicle divisions, including a period running the truck business. His total compensation for 2011, including fixed salary, bonuses and long-term stock options, was calculated at about 8.65 million euros, with a possible increase if Daimler beats performance targets in coming years.

A member of Daimler’s management board since 1998, Zetsche was also CEO of U.S. carmaker Chrysler, a Daimler unit at the time, from 2000 to 2005. Zetsche became head of the Mercedes- Benz car division in September 2005 and succeeded Schrempp as Daimler CEO three months later.

Remaking Daimler

Zetsche has largely stripped the company of Schrempp’s legacy, imitating Chrysler’s separation in 2007, deciding in 2011 to discontinue the ultra-luxury Maybach brand and proceeding with an exit from European Aeronautic Defence & Space Co. (EAD), the parent of planemaker Airbus that Daimler helped found, with the sale of a 7.5 percent stake in December.

Daimler also extended Thomas Weber’s contract as development chief through 2016. The engineer, 58, was promoted to Daimler’s management board in 2003 and has been responsible for research and development since May 2004, overseeing the introduction of the four-door CLS coupe. Weber, who joined the then Daimler-Benz AG in 1987, has a PhD and was awarded an honorary professor title from the university of Stuttgart in 2010.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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