Daimler Chief Zetsche Vows Comeback With 13 New Models

Daimler AG Chief Executive Officer Dieter Zetsche will roll out 13 new models with no predecessor in the next eight years as part of an aggressive plan to retake the top spot in luxury-car sales by 2020 at the latest.

“I’m very confident that we will come back to our leading position,” Zetsche said in a television interview on “Bloomberg Surveillance” with Tom Keene. “First of all, of course, it’s about the design and the desire which our products are creating.” The shares rose to the highest in 10 months.

Zetsche, whose contract may be extended this month by five years, is targeting increases in revenue and deliveries in each of the next two years by bringing to market a reworked E-Class sedan, the four-door CLA coupe and revamped flagship S-Class. Those models come on top of the revamped A- and B-Class small cars that he introduced last year.

The CEO is spending a total of 21 billion euros ($28 billion) in the next two years on research and development, plants and equipment in an attempt to catapult Mercedes-Benz from third place in luxury-car deliveries back in front of Bayerische Motoren Werke AG and Volkswagen AG’s Audi. Mercedes was passed by BMW in 2005 and Audi in 2011.

“We are convinced we have the strongest brand,” the CEO said in the Bloomberg TV interview. “We are technologically in the leadership position.”

The shares climbed 1.20 euros, or 2.8 percent, to close in Frankfurt at 44.21 euros, the highest since April 4. The stock has gained 7 percent this year, valuing the Stuttgart, Germany-based company at 47.2 billion euros.

Cost Reductions

The revenue and delivery gains won’t immediately improve profit as the CEO cuts 2 billion euros from spending at the Mercedes car unit and eliminates 2,100 jobs at the truck division. Earnings before interest and taxes from ongoing business this year will be on the same level as 2012 after falling 10 percent last year to 8.1 billion euros, the company, also the world’s largest maker of heavy trucks, said today.

Mercedes-Benz cars aims to achieve 33 percent of the cost savings this year and the rest in 2014, Chief Financial Officer Bodo Uebber said at a press conference in Stuttgart today. The automaker will accomplish 40 percent of the cuts through lowering material costs, he said.

“We are combining our product offensive with a strong --we call it ‘Fit For Leadership’ -- efficiency program,” Zetsche said in the interview. “All these investments will bring very good returns in the years to come with all the great product coming from them.”

Profitability Drop

Costs to develop and roll out the new models are eating into the auto unit’s profitability, with the 2012 operating margin dropping to 7.1 percent from 9 percent the previous year. Ebit this year at the Mercedes car division, which includes the Smart brand, is expected to be slightly lower than in 2012, the company said. Daimler forecast the group’s operating profit will improve beginning next year as the spending cuts and new models boost earnings.

“They have a real strong product momentum which will increase volume and finally profits,” said Christian Breitsprecher, a Frankfurt-based analyst with Macquarie Europe Ltd. who has an outperform rating on the shares. “Probably from 2014 onwards we’ll see margins more in the direction of 8 percent to 9 percent.”

Zetsche’s strategy to narrow the sales gap with BMW and Audi includes becoming more competitive in China. Mercedes’s sales growth in the country lagged behind its two competitors last year, prompting the carmaker to combine sales organizations for imported and locally produced vehicles into one entity.

Daimler also plans to buy a 12 percent stake in Beijing Automotive Group Co.’s auto division, which is preparing for an initial public offering by the end of this year or early in 2014. Mercedes and BAIC, as the Chinese company is known, already operate factories together making the German brand’s C-and E-Class sedans and GLK sport-utility vehicle.

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