Commercial vehicle manufacturer: “We are ready for independence” – Daimler Truck goes public in December

Munich Now it is fixed: In just over a month, the Stuttgart car manufacturer Daimler will split off its truck division and go public in Frankfurt, as the Dax group announced on Thursday. Specifically, all shareholders of the Mercedes manufacturer are to receive one share in the new Daimler Truck Holding AG for every two shares in Daimler AG on December 10th.

After more than a hundred years, one of the largest industrial conglomerates in Germany will be broken up into two parts: Mercedes-Benz for luxury cars and vans on the one hand, and Daimler Truck for heavy articulated trucks and buses on the other.

“We can’t wait to make our company even stronger. One month before the planned IPO, we are ready for independence, “explained Martin Daum, CEO of Daimler Truck. The manager announced to investors that he intends to distribute 40 percent of the group’s profit attributable to the shareholders in the future Daimler’s dividend policy that has existed for years.

The greatest beneficiary of any distributions is likely to be Mercedes-Benz in the future. The car manufacturer initially wants to keep 35 percent of the shares in Daimler Truck. Mercedes front man Ola Källenius hopes that two specialized companies that act independently of each other can act faster and more efficiently than two divisions within a large corporation that requires many coordination loops.

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According to Källenius, the listing of Daimler Truck on the stock exchange should offer added value for employees and investors. In fact, analysts assume that the division could be valued at up to 40 billion euros.

CEO Daum bristled with self-confidence when he appeared in front of the investors. The 62-year-old wants to significantly increase the pace of saving. The manager assured that the truck market leader with around 100,000 employees would not only be able to reduce the fixed costs by 15 percent by 2025, but two years earlier, i.e. by 2023.

The reason: The program launched in 2019 to reduce personnel costs by 280 million euros at the core brand Mercedes-Benz is already “halfway done,” said Karin Rådström, the manager responsible for the division. But the truth also includes: Daimler actually wants to save 300 million euros in personnel. For 20 million euros of this, the group has not yet deposited any specific measures. But this should still happen, said a company spokesman.

Either way, the turnaround in Europe and Latin America is “on the right track”, explained Rådström. In addition, the product portfolio has been streamlined and the number of basic models has been reduced from 140 to 100.

Yield should climb to double-digit levels by 2025

For 2021, Daimler Truck expects a return on sales adjusted for special effects of six to eight percent. A margin of up to nine percent will then be possible in the coming year. And if the market conditions are good, the return should climb to a double-digit level by 2025 at the latest.

In recent years, Daimler Truck has failed to convert its size into strong profitability several times. Smaller commercial vehicle manufacturers were usually much more profitable. This is currently still the case.

After three quarters, Daimler Truck has an operating margin of 8.5 percent. Swedish rival Volvo Trucks achieved a return of more than twelve percent and US competitor Paccar more than eleven percent in the same period. Only the Munich competitor Traton (MAN, Scania) is currently far worse than Daimler Truck with a margin of three percent.

CEO Daum nevertheless praises improvement. His motto is: “Every segment has to deliver”. To ensure this, he has for the first time defined separate profitability targets for each division for the year 2025. Accordingly, the company’s earnings pearl – the business in North America with brands such as Freightliner or Western Star – is expected to deliver an adjusted return on sales of twelve percent in the future. It is currently eleven percent.

At the same time, the margin of the European problem child Mercedes-Benz is to increase from currently 4.5 to ten percent, that of Trucks Asia from 7.2 to nine percent, and the margin of the ailing bus division from minus 2.6 to plus 7.5 percent. With the new financial services business, Daimler Truck is also aiming for a return on equity of 14 percent per year in the medium term.

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