Mercedes 18,600-Mile Trip Parts With Daimler's Century of Strategy Shifts

Daimler AG is sending fuel cell- powered Mercedes-Benz compacts on a 30,000-kilometer (18,600- mile) trip to show that the best days for the 125-year-old German company aren’t necessarily behind it.

Former Formula One champion Michael Schumacher and racing colleagues Nico Rosberg and David Coulthard started the four- continent journey from Stuttgart on the weekend. Three B-Class models are heading to Lisbon before crossing North America and Australia. The trip’s final leg takes them from Shanghai to Moscow and Stockholm before returning to Stuttgart early June.

Daimler, which packed fuel cells into the back of a delivery van to create the world’s first vehicle using that technology in 1994, is showcasing B-Class F-CELL to mark the invention of the first motor vehicles by founders Carl Benz and Gottlieb Daimler in 1886. Now under Chief Executive Officer Dieter Zetsche, the second-largest luxury-car maker is leaning on its past to take on Bayerische Motoren Werke AG and Volkswagen AG’s Audi.

“Daimler needs to regain some of its innovative edge, and fuel cells might help them do that,” said Philippe Houchois, a London-based analyst at UBS, who recommends buying the shares. “Daimler has pretty much been in the forefront on fuel cells, but they haven’t been very consistent.”

The event in Stuttgart, Germany, which kicks off a year- long celebration, was attended by about 1,400 guests including Chancellor Angela Merkel and former tennis star Boris Becker.

Becker, Eastwood

Actor Clint Eastwood and Google Inc. CEO Eric Schmidt congratulated Daimler via video, while performers suspended on wires ran vertically across giant video screens displaying images of the automotive past and possible future.

Shares of Daimler, which is also the world’s largest truckmaker, have risen 69 percent in the past 12 months, trailing the 93 percent gain by Munich-based BMW. Wolfsburg, Germany-based VW, Europe’s biggest carmaker, more than doubled in the same period.

Daimler, which received a patent related to its plans to produce lithium-ion batteries at the celebration, is trying to regain its position as an automotive leader after wild swings in strategy in recent decades.

In the 80s and early 90s, under CEO Edzard Reuter, the company sought to diversify into electronics, aviation, and computer services, purchasing electronics company AEG and setting up aerospace unit Dasa. Those efforts were then largely undone under Juergen Schrempp, who sought to create a global automaker with the merger with Chrysler LLC in the U.S. and the integration with Japan’s Mitsubishi Motors Corp.

Running Chrysler

Zetsche, who ran Chrysler from 2000 to 2005 and took over the top job at Daimler from Schrempp in 2006, handed control of the Auburn Hills, Michigan-based automaker to Cerberus Capital Management LP in May 2007. Fiat SpA now controls 25 percent of Chrysler, following the U.S. manufacturer’s 2009 bankruptcy reorganization.

“Mercedes was once the most sought-after automotive brand, but Daimler lost sight of its strengths by trying to become a technology company and then a global automaker,” said Wolfgang Meinig, head of Forschungsstelle Automobilwirtschaft, an independent research institute in Bamberg, Germany. “Those strategic shifts were huge mistakes, and as a result, the Mercedes star has lost some of its shine.”

Fuel cells create electricity through the chemical reaction that creates water from hydrogen and oxygen. The technology has been hampered by the difficulty of storing and moving hydrogen and by costs of manufacturing the membranes that capture the electron in the reaction. Daimler has invested more than 1 billion euros ($1.4 billion) in fuel-cell technology.

Monthly Rates

“We know that the technology works, but we’re not going to be able to buy one of these vehicles any time soon,” said Al Bedwell, an analyst with J.D. Power and Associates in Oxford, England. The current cost of producing a fuel cell car could run into millions of euros, he said.

Daimler is leasing the B-Class F-CELL for 950 euros a month for 36 months. The company advertises lease rates on the conventional model for 294 euros. The fuel-cell vehicle, which accelerates to 100 kilometers (62 miles) per hour in 11.4 seconds, 1.2 seconds slower than the gasoline-powered by B200, was first delivered to customers in December. The manufacturer plans to build 200 B-Class F-CELLs and will also start delivering about 30 fuel-cell buses to Hamburg’s public transit system in the coming months.

Ford Venture

The current B-Class version sandwiches the equipment under the floor and, unlike past versions, can start in freezing temperatures. The B-Class F-CELL has a range of about 400 kilometers (248 miles) on a full tank, more than double the Nissan Leaf’s 100 miles.

The Mercedes-Benz maker owns a majority stake in Automotive Fuel Cell Corp., a joint venture with Ford Motor Co. and Ballard Power Systems Inc. Other automakers are also active in fuel-cell research. Honda Motor Co. leases a few dozen FCX Clarity sedans to Los Angeles-area drivers.

Doubts about the long-term viability of hybrids and the limited range of battery-powered cars have increased interest in fuel-cell research after stalling a few years ago, said Jean- Francois Tremblay, an analyst with Ernst & Young in Montreal. Efforts in Germany, Japan, and California to set up hydrogen fueling stations offers prospects for making fuel cells viable.

“This unique round-the-globe trip with customer-ready fuel-cell vehicles shows that we have sufficient pioneer spirit for at least another 125 years,” CEO Zetsche said at the event. “We’re an ambitious company and have a lot planned.”

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.

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