Daimler CEO Revenue Up Mercedes to Challenge BMW

By Christina Rogers

Daimler AG, owner of Mercedes-Benz, wants to knock BMW AG off its pedestal as the world's largest luxury-car maker by 2020.

The 88-year-old company has taken major steps toward that goal, refreshing most of its Mercedes lineup, with plans to begin selling at least 13 all-new models by the end of the decade.

Dieter Zetsche, Daimler's longtime chief executive, is leading the company's rejuvenation effort, which also includes relocating Mercedes's U.S. headquarters to Atlanta from New Jersey, a decision announced Tuesday.

Profits and sales rose in 2014. Daimler, which also makes heavy trucks, is benefiting from strong demand for its redesigned flagship S-class sedans and expanded line of compact cars, as well as growth in the U.S., Europe and Asia.

Heading into 2015, however, currency troubles in Russia are pushing up car prices and slowing economic growth in China could hurt auto sales.

The 61-year-old Mr. Zetsche, an engineer who once starred in Chrysler TV commercials as "Dr. Z," took the helm at Daimler in 2006. He has championed a push into cars that drive themselves. At the Consumer Electronics Show this week, he unveiled a new pod-shaped concept car capable of self-driving.

In an interview Tuesday with The Wall Street Journal, Mr. Zetsche discussed the global outlook for the luxury-car market, the economic slowdown in China and challenges ahead for self-driving cars. Edited excerpts:

WSJ: How are you tracking on your goal to overtake [ Volkswagen AG's] Audi, and BMW in global sales by 2020?

Mr. Zetsche: There are a number of markets where we have passed [those rivals]. In Japan, we're very strong. In Russia, we are very strong. The decisive market is China. Outside of China, we've been selling much more than Audi. We're on par with BMW outside of China. So the more we catch up in China, the faster we will be No. 1.

WSJ: How are you coping with the China slowdown? Is Mercedes's expansion there coming too late?

Mr. Zetsche: We have increased our dealer body. We've added 100 dealer points last year, many of them being in tier-three markets. We're definitely not in an overdealer-ed situation. I have no doubt the planned capacity we have and are establishing will be used. I'm not seeing any risks in this regard.

Independent of the question of whether China grows with 7% or 6.8% [gross domestic product], I'm very optimistic that we will catch up to our competitors.

WSJ: What is Daimler's toughest market?

Mr. Zetsche: Obviously Russia--which is an important market for us and was even in 2014 very successful--is in a difficult situation, and we'll see that in our sales. Europe continues to have very sluggish growth. We've seen some nice growth rates in some countries but coming from very low levels.

As Mercedes, we're growing pretty fast in Europe. We expect that to continue this year, but the overall market won't continue to be bullish. Brazil continues to be difficult and disappointing.

WSJ: What does Mercedes have over rivals Audi and BMW?

Mr. Zetsche: Our momentum is building very strongly around the globe. The brand is becoming stronger and more relevant to young people. And, to some extent, this growth we're producing is having an impact on some traditional buyers [of mass-market brands.] We've seen strong years by BMW and Audi that have had growth rates above ours.

We are now the fastest-growing premium brand. And we intend to continue that way.

WSJ: When might a fully self-driving car arrive at dealerships?

Mr. Zetsche: Today in our dealerships, you have cars--the C-class, E-class, S-class--that are partially autonomous. We'll add further steps to that within this decade. A car like the one we unveiled [Monday will come] next decade.

WSJ: What obstacles remain?

Mr. Zetsche: One is the regulator; the other is liability. The moment you go to full autonomy, the responsibility shifts from the driver to the manufacturer, and we have to clarify what that means. Then, there are some ethical questions. Accidents will go down dramatically, [but] there will still be some. The algorithm will have to decide, if there are choices, whether to hit one or the other obstacle. These decisions are made by man today, whether unconsciously or consciously, and transferring them to a robot is a different thing.

WSJ: Some analysts project U.S. auto-market growth could taper this year. How will this impact the luxury market?

Mr. Zetsche: The [U.S.] economy altogether is very promising. We should see something in the range of 3% GDP, and that should have an impact on auto sales. I would expect the premium market is at least as strong as the volume market. So I think the environment is fine. Plus, more new models will give us good growth potential.

WSJ: You've been CEO for nine years. Will you stay on after your contract expires in 2016?

Mr. Zetsche: I haven't made this decision yet. I just finished the first year of a new three-year contract. I'm more focused on the company and our development than on my contract.

WSJ: Daimler recently sold off its Tesla Motors stake. Do you view the company as a competitor?

Mr. Zetsche: Selling these shares had nothing but financial considerations. We bought low and sold high, which is typically a good thing. We have a good relationship with Tesla. They're supplying the electric-power system for the B-class. That's a good relationship that continues, so the two have nothing to do with each other.

 
Revenue, in billions    Profit, in billions    Employees 
3Q 2014     3Q 2013     3Q 2014     3Q 2013    3Q 2014  3Q 2013 
EUR33.1     EUR30.1     EUR2.8      EUR1.9     282,302  274,616 
Daimler AG

EUR1=$1.1891

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