BMW AG vs Daimler AG

[Ultimate Car Guy]

Hi all,

UCG back again to give the forum some facts and an analysis between the BMW AG v Daimler AG corporate rivalry.

Please note that i'm performing an analysis on the financial performance between the two companies and I'll only be discussing corporate strategy and tactics.

If you wish to discuss non-corporate things like headlights, side-lines etc. please do so in other threads.

Some facts, a majority of which has been obtained from this insightful article:

http://www.autonews.com/apps/pbcs.d...ued-at-half-of-bmw-as-zetsche-loses-investors

1. Overview:

BMW AG's portfolio predominatly mainly comprises of automotive brands (BMW, BMW M, BMW i, MINI and Rolls Royce) with a relatively small operations in motorcycles (BMW and Husqvana)

Daimler AG's portfolio, compared to BMW's, is more diverse and a lot larger with operations that encompasses both automotive (Mercedes-Benz, AMG and Smart) and commercial vehicles (vans and trucks).

Damiler's and BMW's automotive operations are relatively comparable. However, Daimler's commercial vehicles division is significantly larger than BMW's motorcycles division.

2. Current value of the 2 companies:

- BMW is listed at approximately 45 billion euros

- Daimler is listed at approximately 42 bullion euros

It is estimated that Daimler's commercial vehicles division, if it were sold-off, would be valued at approximatelly 17 billion euros.

This leaves approximately 25 billion euros as the deemed-value of Daimler's automotive operatons (Mercedes-Benz, AMG and Smart).

In other words if BMW were to sell, it would be worth 20 billion more than the Mercedes-Benz portfolio.

This is a massive difference and from the perspective of a Daimler shareholder, it's very very alarming.

3. Some more facts:
Some facts that i pulled from a post i made earlier in the year.

Lets compare BMW to Daimler (it's nearest competitor)

BMW:
17 February 2011 = Euro 53 per share
17 February 2012 = Euro 72 per share

Movement = + 35%

Daimler:
17 February 2011 = Euro 54 per share
17 February 2012 = Euro 48 per share

Movement = - 11%

3. BMW’s earnings before tax margin for the period to September 2011 was 12.8%. By comparison, Daimler has a margin of 8.3%, VW of approximately 6.7% and FIAT of approximately 5%. [www.autonews.com]

 

[Gullwing]

Daimler just sold all/ a large portion of their Airbus shares.

 

[Ultimate Car Guy]

My analysis:

My any measure, the above information does not make good reading. If i were a shareholder, i'd be very concerned and would actually consider moving my shareholding to another automaker such as VW or BMW.

It's obvious that Daimler's current predicament were caused by bad decisions made in the past decade and that management are now implementing solutions to correct these errors. Surprisingly, management at Daimler has remained fairly consistent over the past 5-7 years so i'm quite surprised that no-one has been sacked as a result of these errors.

Mistakes made:

1. Mercedes has lagged BMW and VW in productivity:

In the early to mid 2000's. Mercedes cars were more expensive and time-consuming to manufacture tham BMWs. During that time, Mercedes was pre-occupied in resolving their quality issues that were little resources were allocated to optimising productivity.

BMW made major leaps during that period. For example, the E90 3 series (launched in early 2005) had a production ramp-up period that was cut at half the time to 3 months.

2. Resources have been allocated to non-core, non-essential projects:

I would say that F1 is a non-core and non-essentail project that has absorbed hundreds of millions of euros from the company. And what has Mercedes got to show for it? a single race win.

I would also cite the AMG SLS Gullwing within this category. I fail to see the purpose of this vehicle when AMG has a plethora of Black Label vehicles that do the exact same thing.

Maybach - nuff said.

3. Lack of a clear environmental strategy:

BMW have fully exploited the "Efficient Dynamics" mantra. And have made massive strides in the innovation front.

Where is Mercedes' own version of Efficient Dynamics? Blutec? and why isn't it so clearly defined and communicated in the marketplace?

Also, where is their version of BMW i and Audi eTron?

4. Slow in reacting to growth in small cars:

Mercedes only began creating desirable small cars in 2012 with the launch of the A-Klasse. This came after a 8-year product lifecycle for the previous A-Kasse (and 1 year is simply too long). Management simply delayed their decision in devising the replacement for the previous A-Klasse.

Meanwhile, both BMW and Audi have been building desirable vehicles within the small-car category for over 8 years.

5. Slow in setting joint-ventures with other manufacturers:

Like the above, Daimler have only just begun a joint-venture with Nissan/Renault and because of the lag times, it'll take a couple more years before we start seeing the fruits of this relationship. Why didn't they do this earlier? when BMW had Peugeot/Citroen and Audi with VW.

6. CEO is stretched too thin:

Zetsche has the role of CEO for both Daimler and Mercedes. As a result, his time is too stretched and he can't focus purely on Mercedes-Benz. For focus and succession reasons, there needs to be a seperate CEO for the brand. Possible candidates include Andreas Renchler (chief of commercial vehicles) and Wolfgang Bernhard (head of production and purchasing for Mercedes).

7. Poor performance in China:

Whilst both BMW and Audi have recorded increase in sales of 37% and 26% respectively, Mercedes recorded only of 4.2%. This is unacceptable and hence why they've appointed a dedicated board member.

 

[Merc1]

Very good post UCG.

However a couple of reasons as to why:

4. Slow in reacting to growth in small cars:

Mercedes only began creating desirable small cars in 2012 with the launch of the A-Klasse. This came after a 8-year product lifecycle for the previous A-Kasse (and 1 year is simply too long). Management simply delayed their decision in devising the replacement for the previous A-Klasse.

Mercedes did look around for a partner, but couldn't find one for their next generation small cars. That costs them a few years since they had to refocus and develop one on their own.

7. Poor performance in China:

Whilst both BMW and Audi have recorded increase in sales of 37% and 26% respectively, Mercedes recorded only of 4.2%. his is unacceptable and hence why they've appointed a dedicated board member.

I still don't understand this one. The way I'm grasping it is that they have 2 different sales channels? One for imported cars and another for cars that are built in China? Chinese won't buy cars that aren't made there???? Really don't get this one, besides some Chinese think Mercedes is for old people. Yet they love Buicks. They're lost buyers IMO, have no clue about anything heritage wise IMO. Not sure what Mercedes can do there.


I'm not sure they should give up F1 yet though. To do it now would make sense in the long run I guess, but the blow to the image would be greater right now, in the moment IMO.

NO way do I believe that BMW is worth "28 billion more" than Mercedes-Benz. There is just no way that could be true. I need to see more than one article stating that. That is just mind boggling.

Everything else is spot on IMO. Mercedes is still reeling IMO from the whole Chrysler thing, they were taken so far off track and now they're still playing catch up, which is hard in the car industry.


M

 

[K-A]

I for one wouldn't invest in Daimler right now if I was speculating. The business seems to be in chaos mode which could make or break it, however not very confidence inspiring from such an old company. I'm not sure how their stock looks but if it's trading at an low enough multiple i.e low expectations then IMO that would be the best way to engage a holding. Their previous fumbles have lost them massive momentum, which is still bleeding into their current strategies and products. Look no further than massive product changes required in never-seen-before timing and continuous portfolio re-structuring to paint a picture.

IMO it seems Audi brand itself has the most growth potential by far, and BMW is poised to lock up having the most valuable Luxury Brand by a longshot if they don't screw things up like Mercedes did before them.

 

[LaArtist]

German officials previously said KfW would take 7.5% of EADS, a figure confirmed by a Ministry of Economics spokesman on Tuesday. Daimler owns about 15% of EADS but controls nearly 22.5% of the company following a deal in 2007 with German investors to reduce its ownership, according to EADS.
At the company's current share price, a 7.5% stake in EADS is valued at more than €1.8 billion ($2.3 billion), but it remains unclear how the transaction would be priced.

Corrections & Amplifications:
Daimler owns 15% of EADS but controls 22.35% of the company. KfW Bankengruppe will acquire part of Daimler's 15% stake. An earlier version of this article incorrectly said the bank would buy 22.35% of EADS.

http://online.wsj.com/article/SB10000872396390444017504577645190880139880.html

 

[Human]

Now I suppose that is damage control. And this will supposedly continue going forward as Daimler has Billions to recover.

The timeline shows the net income resp. loss of Daimler AG from 2001 to 2011. In 2009, Daimler AG had a net loss of 2.64 billion Euros, giving a 'easy read' perspective fo the specific period.

www.statista.com/statistics/77968/net-income-respectively-loss-of-daimler-ag-since-2001/

Ok, so all these shareholder info is easily obtainable, but what losses in money value has still not been recovered from the Schrempp days? And the DaimlerChrysler fiasco? And then back in 1998 being a young-loyalist + enthusiast to M-B and the then DaimlerBenz, my gut told me that Stuttgart + Michigan is a disaster in the making. Hence my letters (per post) to Herr Schrempp an Hubbert (Edit: Wolfgang I will scan and post the reply letters as promised before)
My point in the end is that the DaimlerBenz/Chrysler/Daimler conglomorate was a wild flying duck that became a fat goose. With such subsidaries as AEG, Western Star Trucks, Freightliner, EADS holdings (DaimlerBenz Aerospace) etc. etc. It seems as if all the top-brass from Edzard Reuter - up - had the "Borg Syndrome" only they bought into the wrong companies and ideas. Now it's a looooong process of damage control in a worsening economic enviroment with so many challenges. But it started a long, long time ago for Daimler AG as I pointed out. They will IMO only manage this by selling the 'weight' and investing into it's core bussiness and the opportunities that lies within that core. So then beginning with EADS maybe just that!

 

[Mr. Mercedes]

Fantastic thread.

BMW is one of the most well managed companies. Conversely Mercedes is frantically trying to recover from a decade of mistakes (CHRYSLER!!!!), and being so frantic, seem to be making a few new ones, very clearly highlted in UCG's post.

While I don't doubt Zetchse is a brilliant engineer and manager, UCG raises a very valid point that he may be stretched too thin heading both Daimler and Mercedes. I'd like him to assume responsibility for Daimler, and Woflgang Bernard take the helm at Mercedes.

Another more superficial, but no less important, point I would add to Ultimates list is what I believe has been a mismanaged handover and convoluted desing direction at the design deparment. It appears that the move from Pfeiffer to Wagoner has been less than seemless and Wagoner now feels he has to right Pfeiffer wrongs (The GLK, E-class, SL).

To clarify, from the information you guys have posted regarding EADS, would it be correct to think that Daimler has sold shares to raise some desperately needed cash, or is simply just a case of EADS not performing to expectations and having a less positive outlook?

 

[Mr. Mercedes]

Now I suppose that is damage control. And this will supposedly continue going forward as Daimler has Billions to recover.

The timeline shows the net income resp. loss of Daimler AG from 2001 to 2011. In 2009, Daimler AG had a net loss of 2.64 billion Euros, giving a 'easy read' perspective fo the specific period.


Ok, so all these shareholder info is easily obtainable, but what losses in money value has still not been recovered from the Schrempp days? And the DaimlerChrysler fiasco? And then back in 1998 being a young-loyalist + enthusiast to M-B and the then DaimlerBenz, my gut told me that Stuttgart + Michigan is a disaster in the making. Hence my letters (per post) to Herr Schrempp an Hubbert (Edit: Wolfgang I will scan and post the reply letters as promised before)
My point in the end is that the DaimlerBenz/Chrysler/Daimler conglomorate was a wild flying duck that became a fat goose. With such subsidaries as AEG, Western Star Trucks, Freightliner, EADS holdings (DaimlerBenz Aerospace) etc. etc. It seems as if all the top-brass from Edzard Reuter - up - had the "Borg Syndrome" only they bought into the wrong companies and ideas. Now it's a looooong process of damage control in a worsening economic enviroment with so many challenges. But it started a long, long time ago for Daimler AG as I pointed out. They will IMO only manage this by selling the 'weight' and investing into it's core bussiness and the opportunities that lies within that core. So then beginning with EADS maybe just that!

Human, I remember hearing the announcement on a Saturday night on the news. I was very young and naive back then, but something made me so sad about the announcement, something told me it was so wrong, that I almost cried LOL (that's how much I loved MB).

Schremp was more concerned about become one of the largest automotive manufacturers overnight, through the acquisition of Chrysler, than actually dissecting the business case properly. He bought a billion dollar basket case (to put it very mildly) and was then faced with literally sending hundreds of engineers over to Chrysler, bleeding MB for all it was worth. He is the only CEO of Mercedes to not be offered a place on the supervisory board once his term was over, and I'm sure is hated in the halls of MB HQ.

There was a very interesting article in the economist back then which listed the salaries of the CEO and other members of the board pre 'Merger' and then post 'Merger'. The package increases were borderline ridiculous and this may have blinded some of them. The economist in the same article also printed data about salaries for the other German and Japanese auto manufacturers, and if I recall correctly Schremp ended up with an annual pay 4 times that of the BMW CEO.

 

[Mr. Mercedes]

Beyond bitching about some lines that have gone astray on a cars flanks, I LOVE the auto analyst side of the business and wish we were privy to more of the discussion and detailed information that these analysts are. It's completely intriguing to know what are the million variables that were being considered when a certain car is being put to the market or why a car company is performing the way it is etc. What we see in the regular press releases and 'independent' reports from car magazines and websites is so superficial relative to what's happening behind the scenes.

Once again, excellent thread UCG!

 

[Zafiro]

Mercedes Valued at Half of BMW as Zetsche Loses Investors
http://www.bloomberg.com/news/2012-...f-of-bmw-as-zetsche-loses-investors-cars.html

Mercedes valued at half of BMW as Zetsche loses investors
http://www.autonews.com/article/20121215/ANE/312149937#ixzz2FRJDcERX

 

[Human]

Human, I remember hearing the announcement on a Saturday night on the news. I was very young and naive back then, but something made me so sad about the announcement, something told me it was so wrong, that I almost cried LOL (that's how much I loved MB).

Schremp was more concerned about become one of the largest automotive manufacturers overnight, through the acquisition of Chrysler, than actually dissecting the business case properly. He bought a billion dollar basket case (to put it very mildly) and was then faced with literally sending hundreds of engineers over to Chrysler, bleeding MB for all it was worth. He is the only CEO of Mercedes to not be offered a place on the supervisory board once his term was over, and I'm sure is hated in the halls of MB HQ.

There was a very interesting article in the economist back then which listed the salaries of the CEO and other members of the board pre 'Merger' and then post 'Merger'. The package increases were borderline ridiculous and this may have blinded some of them. The economist in the same article also printed data about salaries for the other German and Japanese auto manufacturers, and if I recall correctly Schremp ended up with an annual pay 4 times that of the BMW CEO.

We both gave each other dejavu! The emotions involved back in 98/99.

This brings me back to literally all M-B threads on GCF as of late. Starting with the new A-class. The ongoing 2013 S-class thread and the newest the LCI E-class thread. Whether it's K-A, you, Wolfgang, myself or just a non-bias fan, one thing shines as bright as M-B's Star Emblem - Unsurpassed emotion.

See, we are all more or less the same age here on GCF. give or take a 10+ year difference, except for Martin he's a 40 year old bloke

Jokes aside, even if you give a sh!t about M-B today or still admire the worlds oldest car brand - there was a time every young lad and lady just knew what a Mercedes-Benz and the Three Star was and stood for. Over engineered, Solid as granite, Save as houses and Build to last a lifetime! Oh yes and expensive! I just did not have eyes, ears or anything else for any other brand.

Today, well I still love and respect the brand BUT after I was let down and my loyal confidence ripped apart by reckless CEO's & kie burning the 'brand-bible' and letting Mercedes-Benz rot, becoming the opposite for what it stood for. Back when quality went down the drain etc. I found myself from a W204 into a solidly build. sheer driving machine a BMW 325CI E30 series. For the first time I could feel, see and touch the tank that was the E53 X5's - compared to a ML....well the ML seemed to be made in China by comparison.

My point is this. M-B has turned around, correcting mistakes and the new gen cars are on track to become what we expect from a Benz. Sad reality is and that goes for M-B and BMW, with sub standard premium - cost cutting we will never, ever see the days of the W126 or E39's ever again. Is it just Schrempp's fault OR are the consumer also to blame?

Today I read this (Merc 1) and need I say more!? [From the thread OFFICIAL Mercedes-benz (W212) facelift]

Merc1 said: ↑

Oh I'm sure. There are probably hundreds of little engineering details that have had to be abandoned due to cost and the average brain-dead consumer not being able to appreciate them. If Mercedes still did cars like the W140 or W124 the E-Class would likely be a 75K for a E350 now. Wouldn't work.​

​

M​

​

​

The guy is my hero!​

 

[Ultimate Car Guy]

Great posts guys!

Personally, i feel that Daimler is very much playing catch-up and follow-the-leader.

The Schrempp era in essence pushed the company's progress and development back a good 5 years compared to its rivals. During that time, both BMW and VW have made massive developments in optimising their operations to support future profitable growth. Volkswagen now is simply going from strength-to-strength while BMW is taking the lead in so may benchmarks.

Daimler wants to be number 1 but at present it's playing catch-up to both BMW and VW.

I think this strategy is wrong. In order for a company to both catch-up and overtake it's rivals, it seriously needs to apply some mind-bending acceleration for it's competitors are not going to simply stand still. Both BMW and VW are progressively growing their business and are in a far stronger financial and operational position to do so compared to Daimler.

Daimler needs to take structurally change the company and earn the right to compete for number 1. They need to fully address all the issues i've identified above along with completely recovering from the Chrysler debacle.

Once this is complete, then mangement can then focus their attention on going for number 1. And i would suggest they go after this title in their own terms and not simply mimicing the strategy and tactics of thier rivals - the Mercedes-Benz brand, in my opinion, is the most prestigious brand in the industry and it deserves to grow on it's own merit rather than copying a rival's inferior brand.

 

[Merc1]

I agree. I hate this sales race nonsense. They should be going for the best run company, most profitable and the best cars possible. I actually the Porsche model is the best one. Mercedes and Porsche build cars in the same town, and they both costs and the both have lots of options, have you seen the new GL???

Anyway I think if they want to mimic someone it should be Porsche, from the corporate side to the timeless design and everything else in between.

Nothing is going to stop VW from taking over the world by 2018, nothing. Way too many brands and they're all turning out hit after hit. I love it, and all German cars!!! Great choices for us.

M

 

[Ultimate Car Guy]

^ Good point. The Porsche business model is very intelligent. I know for a fact that Jaguar Land-Rover are trying to mimic it as well.

Porsche has the highest margins within the industry, a very efficient manufacturing system, desirable products and a strong international sales network.

Obviously, Porsche had some financial troubles over the past couple of years with all of the debt acquired as a result of the failed VW acquisition.

 

[EnI]

Porsche would not survive on its own. That's a fact. That's why they tried to acquire VAG to get a strong & strategic partner for the synergies of the economies of scale. JLR is doomed without strategic partner. Sure they are under TATA corporate umbrella, but does TATA have enough resources to feed JLR? I don't think they do. Same case with Aston Martin.

Low-volume premium brands can only survive either when merging with a huge carmaker with lots of resources & know-how (which can provide synergies & economies of scale) ... or staying independent but undergo massive product expansion. There's NO OTHER WAY whatsoever. Not in a long run anyway.

BMW vs Daimler vs VAG ... It all comes down to strategic (& active) shareholders. Of which Daimler do lack. Just look at VAG & BMW what the Quandts & Piech/Porsche families are doing. They know the business! They are not investment funds with only financial interest in the company. They ARE the company. They live with and for it. That's the difference.

And Daimler will struggle all until the shareholder consolidation. Only a strong, big strategic shareholder from within the industry (and strong zeal) will put Daimler on the right path again. All until then Daimler WILL struggle & the gap between Daimler and VAG / BMW will grow even bigger with time. Unfortunately a merger between Renault-Nissan & Daimler is VERY possible in the future. Another Chrysler-like episode, I guess.

VAG domination is inevitable. They are becoming a smooth running machine ... and when consolidation is done, they will prevail.

BMW ... they set a great strategy which works. Multiple partnerships. Very flexible. Very focused. Product expansion. Even introducing new sub-brands. What keeps BMW alive is the flexibility. The marriage with Rover almost killed them since they became too rigid. And what makes BMW such a great & admired brand it's not only an admiration for the products but also an admiration for & respect of the company itself.

 

[K-A]

BMW vs Daimler vs VAG ... It all comes down to strategic (& active) shareholders. Of which Daimler do lack. Just look at VAG & BMW what the Quandts & Piech/Porsche families are doing. They know the business! They are not investment funds with only financial interest in the company. They ARE the company. They live with and for it. That's the difference.

Damn that's a good way to put it and very enlightening. That right there simply clarifies why M-B look like a passionless mess today with cars seemingly designed by the marketing depts, and BMW/Audi so driven and forward thinking YET not afraid to carefully evolve the past.

M-B's being run by mere "people", empty suits in comparison to the VW/BMW groups who are literally being run by those who's blood are engrained within the companies. Very telling and IMO it shows within the products. Maybe this is the "magic potion" that M-B lacks these days: True, bonafide, blood-driven passion.

 

[Ultimate Car Guy]

^^ What a great post Eni!

Glad to have you in this thread.

Volkswagen is majority owned by the German state of Lower Saxony. Whilst they do care about profits, they're more concerned about jobs within the company. Furthermore, they've given Piech the mandate to rule as he pleases. It's no secret within the industry that he can be the supervisiory board chairman for as long as he wants.

BMW have got the Quandts who are obviously long-term investors and have a intimate understanding of their company. When Sussane Quandt bought a shareholdoing in SGL to protect BMW's joint venture, we have direct evidence of a shareholder stepping-in and contributing their own cash for the sake of protecting the long-term interests of thier company.

Daimler? Well, they're predominantly owned by sovereign wealth funds from the middle east, and investment banks. Interesting note: Deutsche Bank has a major shareholding and interest in Daimler. Guess who's the CFO of Deutsche Bank?

 

[Human]

Porsche would not survive on its own. That's a fact. That's why they tried to acquire VAG to get a strong & strategic partner for the synergies of the economies of scale.

Was this really the case/scenario? OR was there more to it? Could it have been a Piech/Porsche families move to put interests in one basket and clever enough to bypass EU regulators and the Competition Comission?

BMW vs Daimler vs VAG ... It all comes down to strategic (& active) shareholders. Of which Daimler do lack. Just look at VAG & BMW what the Quandts & Piech/Porsche families are doing. They know the business! They are not investment funds with only financial interest in the company. They ARE the company. They live with and for it. That's the difference.

See what I mean, trying to say? All for the good in the end! Let's keep it in the family then

 

[EnI]

Volkswagen is majority owned by the German state of Lower Saxony.

Not true. VAG's shareholder structure (voting rights; end of 2011):

50.73% Porsche Automobil Holding SE, Stuttgart
2.37% Porsche GmbH, Salzburg
20.00% State of Lower Saxony, Hanover
17.00% Qatar Holding, Doha
9.90% Others

VAG is a family business as well. Owned by Porsche / Piech families. Mind they also control more than 50% of PAH SE.

BMW & Skion ... Yes, Skion (owned by BMW shareholder Susanne Klatten , born Quandt) secured a stake in SGL initially, and BMW AG entered in SGL shareholder structure later. Today eg. BMW AG owns 15.7% of SGL Group, Skion 26.9%, VAG 8.2% and Voith (VAG's CF partner) 9.1%. So skion/BMW control 42.6% of SGL already, while VAG/Voith own 17.3% of SGL. So it's a case that BMW major shareholders also invest their own cash into strategic businesses essential for BMW.

Daimler - Deutsche Bank - BMW ... Yes, DB owns 5.2% of Daimler AG ... And DBank's CFO is BMW AG's ex-CFO Stefan Krause (under Panke's reign). But there's no hidden agenda behind. German managers are professional, and fluctuate frequently ... eg. Reitzle went to Ford's PAG and then to Linde, Pietscehreider to VAG, Krause to Deutsche Bank etc etc