Daimler Chrysler's Trucks: Running On All Eighteen Wheels

How Kurt Lauk aims to expand his trucks unit

Kurt J. Lauk has always been crazy about big rigs. As an 8-year-old living in the countryside north of Stuttgart, he worked on his neighbor's farm after school just for the chance to drive the tractor. So when fellow truck freak Jurgen E. Schrempp hired him in 1996 to run the commercial vehicles unit of Daimler Benz, Lauk was delighted. "It's great to have a boss who can be emotional about trucks," he says. On weekends, he still does some 18-wheel joyriding on Daimler's test tracks.

These days, trucks are sexy again. DaimlerChrysler's $22 billion commercial vehicles business--the world's largest truck builder--seems humdrum beside the glamorous passenger car division. Yet under Lauk, trucks turned profitable in 1997, after losing money for four years. The division nearly tripled operating profit, to $1.1 billion in 1998.

Moreover, Lauk's bid for Nissan Diesel Motor Co. last year caused a global buzz until talks collapsed after Nissan tried to make its car business part of the deal, too. Lauk's talks with Nissan Diesel kicked off the latest round of industry consolidation. Volvo attempted a hostile takeover of Swedish rival Scania earlier this year and wound up with a 12.9% stake. Volkswagen Chief Executive Ferdinand Piech is asking shareholders' permission to raise more than $10 billion for acquisitions in the business. Worldwide, some 30 truckmakers will be whittled down to five within five years, estimates Richard Welles, a Standard & Poor's DRI researcher in London.

Lauk, 52, has an eye out for other deals, but only if the price is right. Sweden's Wallenbergs approached Daimler about taking a stake in Scania a year ago, he says, but the price was 25% higher than the $5.1 billion value the Volvo bid placed on the company. "It's still too high," Lauk says. "We don't feel any pressure to act."

For now, he will concentrate on Asia, still a big gap in the portfolio. There, the Japanese have a lock on the market. Nissan Diesel would have boosted Daimler's market share in Asia to 20%, from less than 1% now. If Renault decides to spin off the Nissan truck unit, Lauk says he would be open to buying it. Meanwhile, Lauk wants to concentrate on China. DaimlerChrysler already has two partners there and could eventually use China as a base for Asia, if it can bring up the quality of local suppliers.

Lauk took a circuitous route to his current job. He was supposed to have been a Lutheran minister, like the three generations of Lauk men before him. He studied theology but realized life in the pulpit didn't suit him. He earned a doctorate in international politics and then packed off to Stanford University, where he earned an MBA. Boston Consulting Group hired him, and he opened their Munich office. By 1984, when he left to turn around a German textile machinery company, he had embarked on a career of job-hopping rare for a German executive.

Schrempp first courted Lauk in the late 1980s, to help him turn around Daimler's aerospace business. "It was the wrong job and the wrong company," Lauk says. Instead, he accepted an offer from Audi, where he became chief financial officer and deputy president to Piech. In 1992, he took the CFO post at energy conglomerate Veba and instituted shareholder-friendly U.S. accounting practices--making Veba the second company in Germany after Daimler to do so.

SHARED CABS. After Schrempp restructured Daimler into a lean, competitive company in 1995, he finally persuaded Lauk to join. As the first outsider to step into the upper tiers of Daimler management, Lauk brought foreign execs onto the all-German board, including Chairman James L. Hebe from its Freightliner unit in Portland, Ore. Lauk slashed costs more than 20% by redesigning factories and sharing engines and cab designs inside the company--a taste of what would happen to Daimler when they merged with Chrysler in '98.

Lauk can't take all the credit for Daimler's truck turnaround. New products, such as the popular heavy-duty Actros truck, were ready to go. And the market took a cyclical upswing in Europe. In fact, Lauk's team underestimated demand, and Daimler's market share in Western Europe stayed flat because they couldn't ramp up fast enough.

Now, Lauk wants to be measured by new products in the pipeline. He has spearheaded production of a small city van that will feed a booming delivery-vehicle market. He is also looking at ways to share engines, axles, and transmissions between Mercedes-Benz and Dodge vans. "We've reached a plateau, and now we'll use the next two to three years to gain speed and new products," he promises. But only after he has spun them around the test track a few times.