Daimler names first non-German CEO as Zetsche era ends

FRANKFURT -- Daimler named research chief Ola Kaellenius as its next CEO on Wednesday in a succession plan that promotes a raft of tech-savvy managers at its Mercedes-Benz brand and also seeks to install long-serving CEO Dieter Zetsche as chairman.

Zetsche, 65, will step down from his positions on the board of management of Daimler and as head of Mercedes-Benz Cars, at the end of the annual shareholders' meeting on May 22, 2019. Kaellenius, 49, would then be appointed as CEO, Daimler said in a statement on Wednesday. Zetsche has worked as Daimler CEO for 12 years. Prior, he had been CEO of the former Chrysler Group from 2000 to 2005.

Daimler's current chairman, Manfred Bischoff, will recommend Zetsche's election as his successor to take effect at the end of the annual meeting in 2021 following a two-year transition period.

The changes come at a critical time for the world’s biggest luxury automaker as well as commercial vehicle producer. Daimler in June was first among automakers to cut annual targets, faced with unpredictable fallout from trade tensions and pricing pressures on top of unprecedented spending on electric vehicles.

"In view of the challenges presented by the transformation of the automotive industry, the supervisory board intends to prepare a suitable succession at an early stage," Daimler said.

The appointment of Swedish national Kaellenius as CEO will be the first time that the Stuttgart-based inventor of the modern automobile will be headed by a non-German CEO.

With Kaellenius, Daimler is naming a long-serving employee who has risen through the ranks to the top job. He previously headed sales for the core Mercedes-Benz Cars division and led its AMG performance cars unit. His appointment as development chief at the end of 2016 put him ahead in the race to replace Zetsche, prompting then Daimler trucks head Wolfgang Bernhard to leave.

Markus Schaefer, currently head of production and supply chain management, will succeed Kaellenius as head of research and development.

Kaellenius joined Daimler in 1993 after studying management and finance in Sweden and Switzerland. After stints in Mercedes's U.S. plant in Alabama, he developed a track record in performance cars, heading operations at McLaren Automotive and then running Mercedes's performance division AMG from 2010 to 2013.

Unlike past Daimler CEOs, Kallenius has not spent time in the trucks unit. The manufacturer's planned restructuring may pave the way for a partial listing of the division.

Kaellenius has worked to introduce Silicon Valley management techniques at Daimler. Together with Zetsche he oversaw an effort to sweep away layers of bureaucracy and encourage a more experimental approach to new products, changing a culture often slowed by strict hierarchies and meticulous planning.

"Kaellenius can certainly 'sell' a new era better than alternative candidates could have," said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler. The longstanding claim across the German auto industry that the CEO always has to be a engineer is "too simple in these revolutionary times with so many technological challenges," he said.

A major change at Daimler is to empower low level employees to generate business ideas and to allow departments to fund an idea even if it is not clear what products will result from the spending. Having a perfect "specification sheet" used to be a precondition for any investment.

Daimler said two strategy and technology executives would also take over roles previously held by experts in mechanical engineering. Wilko Stark, head of Daimler strategy and planning, will become head of Mercedes-Benz Cars procurement and supplier quality on Oct. 1.

Sajjad Khan, currently head of digital vehicle and mobility, will take over management of Daimler's connected autonomous shared electric (CASE) and electric vehicle architecture (EVA) organization.

Bloomberg contributed to this report.