Mercedes-Benz is in trouble! From “The best or nothing” to Nokia’s fate?


Hi there, my name is Flo and, in this video,
I want to talk to you about the newest developments at Mercedes-Benz and its parent the Daimler
AG. But first I want to ask you to subscribe to
my channel and also hit the notification bell. It is much appreciated and it helps the channel
a lot! Let’s start: Some days ago CEO Ola Källenius
presented the financial numbers for 2019 and there a several shocking statements, here
are two examples: First a sixty-four percent drop in full-year profits to 2.7 billion euros,
from 7.6 billion euros the year before. According to Daimler, the main reasons for
this drop are the following: Governmental and legal proceedings as well as measures
linked to the Diesel emissions scandal. Costs for the replacement of Takata airbags. Costs for stopping the production of the X-Class. The decision to stop offering their car sharing
services in US-cities. And finally the step to work together with
BMW in the car sharing business. Some analysts said, that the development costs
of the EQC and future electric cars as well as problems with the EQC production are also
responsible for this numbers. Secondly, the return on sales for the Daimler
Group dropped from 6.9 percent in 2018 to just 1.5 percent in 2019. This is quite shocking, because it means – simplified
– that for 100 euros the company gets from the customer net, which means after taxes,
Daimler just earns 1.5 euros. In the end it means the Daimler Group produces
too expensive. Producing expensive high end solutions is
part of the DNA of the Daimler Group and especially Mercedes-Benz, but just 1.5 percent return
on sales is just shocking low. But there are also other numbers, which show
that Daimler and Mercedes-Benz are not efficient enough compared to the competition. These numbers can explain why the Daimler
Group is facing more and more problems. And these two weaknesses should have been
addressed years ago: First, as you can see in my Excel sheet here,
in 2019 the Daimler Group had around 300 thousand employees, with this employees the Daimler
Group sold around 3.35 million cars and trucks. This means – again simplified – one employee
produced 11.2 cars and trucks. Compare this to BMW and you can see, that
BMW managed to produce around 8 more cars and bikes per employee. So in this simplified example BMW works more
efficient than Daimler. Just for comparison, I added Toyota and Volkswagen
to this list. You can see, that Volkswagen is also in a
worrisome efficiency situation compared to Toyota. And you can see that Toyota is way ahead of
the three others. Secondly, you can also check – again simplified
– how much revenue an employee of Mercedes-Benz and BMW brings the company: As you can see
in my Excel sheet here, one employee brought in a revenue of around 580 thousand euros. But an employee of BMW brought in around 720
thousand euros! Getting Daimler on the same efficiency level
as BMW, they would need to fire around 60 thousand employees! There are experts who can dive much much deeper
in financial reports of companies and find more examples like the two above to get a
better understanding of a company and its real performance. All in all the numbers we see from Daimler
and Mercedes-Benz are not good and not healthy. Of course this two examples also work with
financial reports form Daimler of the past years, as sales, revenue and employee count
are more or less always on some comparable level – but it perhaps shows why Mercedes-Benz
and its parent the Daimler Group are now the first of the traditional car manufacturer
to present bad financial results. On top of that worrisome numbers and information,
Mercedes-Benz plans aggressive material cost savings targets to achieve better financial
results in the next years. Yes, they really said aggressive in the presentation! Decisions like this always worry me, because
this kind of cost cutting almost always leads to lesser quality. And reputation damage because of quality issues
is a major problem. Just ask Jaguar, Land Rover or Alfa Romeo,
they needed to fight hard and still fight hard to get a better reputation in terms of
product quality. Also the dividend was reduced from 3.25 euros
to 0.90 euros per share. This also shows that the Daimler Group needs
to save money fast. Even their shareholders now feel the problems. There are examples of companies, which did
not reduce the dividend in the past, despite having also financial trouble. This is also an example, that the situation
seems serious. Also the employees of the Daimler-Group now
get less bonus payment. Last year they did get 4.965 euros, now they
only get 1.097 euros. But it does not end here: There are rumors
that Daimler wants not just lay off 10 thousand employees as reported some weeks ago, but
15 thousand! Daimler plans to do this wherever possible
with termination offers, early retirement offers and partial retirement. But surely not every layoff will be without
personal problems for the employees. Also there are rumors, that Mercedes-Benz
will stop offering a successor for the S-Class Coupe and the S-Class Cabriolet. Also the B-Class could perhaps not become
a successor. And finally the CLS and AMG GT – which are
already more or less the same car at its core – could be replaced by a comparable electric
car. The CEO said that the profitability of every
model will be checked, it will be interesting what model decisions we will see in the next
months. And the worrisome rumors still do not stop
there: There are rumors, that Mercedes-Benz will offer less AMG models than today in Europe,
because of the CO2-regulations of the European Union. This will help Mercedes-Benz avoiding paying
fines for having too high CO2-numbers in its fleet. All in all many of the problems Mercedes-Benz
and the Daimler Group are facing now are sadly home grown. Cheating on Diesel emissions should have never
happened. The X-Class was a failure from the get go,
I will get into this in a minute. The try and error mentality with their car
sharing adventure could also have been prevented. Producing to expensive should have been addressed
years, if not decades ago. Toyota is the benchmark for decades here and
even the smaller BMW Group can do better. Having a big range of cars was always wondering
me, offering a car for every niche taste of the customers just makes everything expensive
and complicated. Mercedes-Benz was one of the first companies
to start offering more and more cars of more or less the same type. Remember the first generation CLS? A good looking car, but in the end just a
stylish E-Class. Now they realize that and start to shrink
their portfolio. Mercedes-Benz also started too late in the
electric car game and is now offering an underwhelming product. And the European CO2-regulations don’t come
as a surprise, but Mercedes-Benz seems surprised. And now perhaps they can’t offer every AMG-Model
in Europe anymore. This is a problem because AMGs are money printers. Mercedes-Benz earns good money with this cars
and many customers spec their AMGs to the max. Loosing or reducing this sales in Europe can
have an impact on the overall financial performance of the Daimler Group. And remember, the CO2-regulations don’t
come as a surprise, Daimler could have countered this regulation well in advance. The easiest way would have been hybridization
like Toyota and Lexus does, or more Plug-In-Hybrids or more electric cars. Some words on the X-Class, which is killed
after just 2 years on the marked. This is a remarkable decision, but for me
personally not surprising. The X-Class was a in some points technically
improved Nissan Navara. The Nissan is in no way a bad pickup, it’s
a competitive offer in its class, competing with pickups like the Toyota Hilux or the
Ford Ranger. But in the end the X-Class is not the kind
of car and quality a typical Mercedes-Benz buyer expects. Also, I think not every Mercedes-Benz buyer
can accept to just drive an improved Nissan. Badge-Engineering is risky for every car manufacturer,
but it is especially risky for a premium manufacturer, as their customers expect more. Mercedes-Benz should have had the courage
to develop a high-quality pickup or just don’t do it. A rebadged Nissan was the worst decision they
could have done. And finally to the Takata airbag costs, that
Daimler also mentions. This costs has almost every car manufacturer
to pay, so for me Takata is no excuse for Daimler’s bad financial situation. As a result Mercedes-Benz and the Daimler
Group are in full damage control mode now. The CEO said they are now on a turning point
and the next three years will be tough. He said they will work around the clock to
restore the group’s financial health. Seeing Toyota doing just doing healthy every
year, pushing further with Lexus. Seeing Hyundai Kia starting to attack aggressively
with their premium brand Genesis. Seeing Tesla pushing hard with more and more
models. Seeing Lincoln offering new attractive SUVs. Seeing the CO2-regulation of the European
Union. Seeing Rivian with Amazon-money in the background. And seeing Chinese premium manufacturers also
starting to attack the established manufacturer in the next years, I see extremely tough times
for Mercedes Benz and the Daimler Group. It’s not fighting against BMW, Lexus and
Audi like 30 years ago, its war on all fronts. If the management does not realize how dangerous
the situation is right now, the inventor of the car could be bought by a Chinese real
estate company, like Saab. So that’s it from me and let me know what
you think of the newest developments at Daimler and Mercedes-Benz. And please like, share, subscribe and also
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