By Geoffrey Smith and Reuters
October 17, 2017

Daimler, the German parent company of luxury automaker Mercedes-Benz, is planning its biggest corporate shake-up since it disposed of Chrysler in 2007, in a move that will make it easier for it to develop ‘transportation as a service’ and get more value out of its underperforming truck division.

The Stuttgart-based group has committed more than 100 million euros ($118 million) to help create separate legal entities for its Mercedes-Benz cars and Daimler Trucks divisions. The cars unit would also include vans, while the trucks unit would also include the company’s bus division. Services (primarily the group’s financing arm) would be the third pillar.

Under the proposals, Daimler would be split into three independent stock corporations with their own management and supervisory boards capable of signing cross-shareholding agreements with any partners, a person familiar with the matter told Reuters, without giving more details.

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Separating Daimler‘s divisions could make it easier to value them and create a higher figure than for the current combination, with trucks and buses on their own worth 31 billion euros, analysts at Evercore ISI have said.

“We not only need to be as close as possible to our customers’ pulse, but also to be able to react as quickly and flexibly as possible to market developments and a fundamentally changing competitive environment,” finance chief Bodo Uebber said.

Chief Executive Dieter Zetsche had hinted at such a restructuring already in July, spurring talk of a possible break-up as the group looks to fund big investments in self-driving and electric cars. The company’s stock has risen around 10% since then.

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Zetsche and the company’s board are keen to avoid resistance from the company’s labor unions: Daimler said the company won’t be pursuing any savings, efficiencies or job cuts related to the reorganisation. Quite the opposite, in fact: it has prolonged its current job guarantees until 2029 from 2020, and will inject 3 billion euros into to the group’s pension fund in the fourth quarter.

Daimler said it has no immediate plans to divest any of its divisions and no final decision on the legal split had been made. The earliest that shareholders could approve the proposed restructuring is in 2019, the company said.

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“Daimler may be against putting anything up for sale now but of course things can look entirely different in 10 to 15 years’ time,” said NordLB analyst Frank Schwope, who has a “hold” recommendation on the stock. He saw the truck operations as the likeliest candidate for a future spin-off.

 

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