Daimler’s truck division sets itself high goals

Daimler wants to outsource its commercial vehicle business. As a listed stock corporation, it should operate more efficiently in the future than before.

Daimler-Truck-Chef Martin Daum

Ob the sun is burning, it is raining or snowing – trucks always have to drive reliably. As far as the business of manufacturers of commercial vehicles is concerned, at least the general economic weather situation has an influence. This was made clear by the strategy day, which the previous commercial vehicle division of Daimler AG, Daimler Truck AG, organized digitally on Thursday. By the end of the year, the Stuttgart-based vehicle group Daimler Truck intends to separate it as an independent company from the previous group and to go public. Also because of this plan, the management around the chairman of the board, Martin Daum, repeatedly pleaded on Thursday how important one’s own profitability was – and how unsatisfied one was with the status quo.

In the year before the Covid-19 pandemic, Daimler’s truck and bus business, with a good 520,000 vehicles sold, had turned over more than 44.4 billion euros and achieved a pre-tax profit of around 2.7 billion euros. With a return on sales of 6 percent, the world’s best-selling truck and bus manufacturer is clearly lagging behind some of its smaller competitors. That is why Daimler Truck is now setting itself higher goals, which will, however, depend on the general economic situation.

Three scenarios – three return targets

If the economy develops well, Daimler Truck aims to achieve a double-digit return on sales as an independent company. In a medium scenario, the return should be between 8 and 9 percent. And even if – like last year – things are not going economically at all, the company still wants to earn 6 to 7 euros before interest and taxes with the Freightliner, Mercedes-Benz, Fuso and BharatBenz brands for every 100 euros in sales. For comparison: the actual return on sales in the pandemic year 2020 was 1.5 percent.

Daimler Truck will significantly increase its profitability, said CEO Daum on Thursday. “We aim for the best value in each region. Every region has to perform competitively, and we stand ready to take the necessary steps to achieve this goal. ”This also includes“ making tough decisions to reduce our fixed costs and further improve our financial performance ”. In Europe, Brazil and Asia, profitability has so far been unsatisfactory. In North America, which contributes a good 40 percent of the division’s sales with trucks of the Freightliner brand, Daimler Truck also generates double-digit returns.

Reduce costs with cost-cutting measures

Specifically, Daimler’s commercial vehicle division has set itself the goal of reducing fixed costs, investments and research and development spending by a total of 15 percent by 2025. As far as the fixed costs are concerned, the savings in personnel costs alone should contribute 300 million euros by 2022. At the same time, the company wants to further reduce the complexity in production and improve its own processes. The measures also include focusing even more on heavy trucks than before. The company also wants to expand its service business. So far, the business with maintenance, spare parts or leasing has contributed around a third of sales. By the end of this decade, half of the revenues will come from services.

At the same time, Daimler Truck also has to invest in new technology, and a lot of money should go into alternative drive types. Daimler Truck is pursuing a two-pronged strategy, for example to meet the requirements of the European Union for reducing carbon dioxide emissions in the transport sector. Purely battery-powered lighter trucks should be used when it comes to distributing goods in cities. In heavy-duty traffic over long distances, on the other hand, hydrogen is to be converted into electrical energy in fuel cells and thus power future tractors. “We will lead the way to emission-free transport by accelerating the development of battery and fuel cell vehicles,” emphasized CEO Daum.

New partnerships should help

Closer and new partnerships with other companies that Daimler Truck announced on Thursday should also help. For example, the Chinese battery cell manufacturer Catl is also to supply power storage for the planned fully electric E-Actros “Long Haul” truck for plannable distances of around 500 kilometers. The delivery agreement reached will extend beyond the year 2030, it said on Thursday. In addition, Daimler Truck and its partners Siemens Smart Infrastructure, Engie and EV Box want to support logistics companies in setting up charging infrastructure for battery-electric commercial vehicles. At the same time, the company is working with the energy group Shell to develop the infrastructure for its planned fuel cell trucks. A network of 150 hydrogen filling stations is to be built in Europe by 2030 to be able to refuel around 5500 fuel cell trucks.

The previous Daimler shareholders will decide at an extraordinary general meeting in the third quarter of this year whether Daimler Truck will actually be separated from Daimler AG. First of all, the previous Daimler shareholders are to receive the future Daimler truck shares. The number of shares is based on the previous stake, Daimler announced when the spin-off plan was announced in February. Around the announcements on the strategy day on Thursday, the Daimler share price rose by almost 3 percent in the meantime.

In mid-2019, the Volkswagen Group had launched its Traton commercial vehicle division with brands such as MAN and Scania on the stock exchange. As far as the share price is concerned, this split has been rather mixed so far. It was only in the past few weeks that the price of the unit certificates had approached the issue price of 27 euros.