Daimler Charts Leaner Approach

BERLIN—Daimler AG has decided that less is more. After months of study, the automotive company that owns the Mercedes-Benz car brand said Monday it is taking preparatory steps to reorganize, consolidating its five business divisions into three separate registered companies.

From left, Daimler CEO Dieter Zetsche with Volkswagen Chairman Matthias Müller and Baden-Wuerttemberg Gov. Winfried Kretschmann in Berlin in August. Mr. Zetsche said Monday that companies need to 'continuously evolve and adapt' to rapid change.  

 The company said the move would give the units greater entrepreneurial freedom and “better utilize the potential for growth and earnings” in their respective markets. The reorganization, which still requires approval from the supervisory board and shareholders, could set the stage for Daimler to break up the company into separate publicly listed enterprises later. The auto maker said there were no current plans to spin off units.
 Daimler's announcement comes amid a recent wave of industrial spinoffs, including announcements last week by Pfizer Inc. and Honeywell International Inc. to hive off major business units.
 Daimler rival Volkswagen AG also unveiled plans last week to group components manufacturing of its dozen different brands into a cohesive unit, a first step toward a potential spinoff farther down the road. Volkswagen said there were no plans to split off the unit.
 Dicing big conglomerates into more manageable businesses has its advantages, say analysts. The businesses tend to outperform the broader stock market. Untethered from the larger corporation, they can become more nimble.
 That is an important factor for auto companies that have to ramp up production of electric vehicles and face competition from Silicon Valley over the development of self-driving car technology.
 “Whoever aims for sustainable competitiveness and profitability must continuously evolve and adapt to rapidly changing surroundings—technologically, culturally and also structurally,” Daimler Chief Executive Dieter Zetsche said in a written statement.
 Daimler now has five separate businesses that generated €153 billion ($181 billion) in revenue last year and €8.8 billion in net income. The reorganization plan calls for creating three independent companies that would be wholly owned subsidiaries of the parent, Daimler AG.
 Daimler would merge Mercedes- Benz Cars and Mercedes- Benz Vans into one company. It would group Daimler Trucks, one of the largest truck makers in the world and owner of Freightliner in the U.S., and Daimler Buses into a second company.
 The third company, Daimler Financial Services, already exists. The unit consists of Daimler's bank that is used to finance car leasing and loans, as well as the company's stable of new mobility services such as the Car2Go car-sharing service, the largest in Europe.
 “We are creating the conditions for greater customer and market focus and therefore more growth opportunities,” Bodo Uebber, the company's chief finance officer, said in a written statement.

A Streamlined Structure

Daimler intends to consolidate into three separate companies.


* Before interest and taxes
Source: company reports


BY WILLIAM BOSTON

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