Collateral Damage

Rough Road Ahead

  • Why it matters

    Why it matters

    The slowdown in Europe’s truck business could dampen overall results at Daimler, the maker of Mercedes-Benz cars and trucks.

  • Facts

    Facts

    • Manufacturers sell more heavy trucks in China each year than in Europe, Japan and the United States combined.
    • Iraq and Ukraine conflicts are depressing truck sales in Europe.
    • Daimler withdrew its European truck sales forecast in light of the conflicts in July.
  • Audio

    Audio

  • Pdf
Source: Andreas Labes
Wolfgang Bernhard, the board member responsible for the truck business at Daimler. Source: Andreas Labes

 

Wolfgang Bernhard, the board member responsible for the truck business at Daimler, appears at ease as he welcomes two Handelsblatt reporters for an interview at his Stuttgart office.

Yes, the truck business in Europe is not going so well but Mr. Bernhard is hoping to use the upcoming industry convention IAA to stress his favorite topics: More money for roads and bridgets, the legal introduction of truck-caravans in Germany and automated truck transit.

A self-driving truck is supposed to be the big hit at the IAA Commercial Vehicles Convention, which runs from September 25 to October 2 in Hanover.

Mr. Bernhard, the truck business is a barometer of the global economy. How is it going?

The situation for the global truck market is currently very uneven. In South America, India and Indonesia, business is hanging on, but we are winning market shares. In Japan, however, it is going well and in the United States we are having a sensational run.

And in Europe?

Here we are still feeling the effects of the exhaust conversion Euro 6, which introduced a special business cycle to the market last year. We are also still feeling the effects that the unstable conditions in Iraq and Russia are having on the overall business climate. Both of them together are reflected in the truck sales, and therefore at the end of July, we withdrew our forecast for the European market.

So how bad does it look?

We are looking at a loss of at least 5 percent over the previous year. That is currently is being confirmed.

Has the current political insecurity carried over into the business?

Russia, like Ukraine, is not an important market for us. But an open conflict would not be a wished-for event for all of Europe.

Still, you are involved with the Russian producer Kamaz. How does that affect the situation?

We decided at the end of last year not to increase our share in Kamaz. Together with the European Bank for Reconstruction and Development, the involvement still lies at 15 percent, whereby we will directly hold the bank’s 4 percent in the future, as planned. In addition, both sales joint ventures for Fuso and for Mercedes-Benz will be pooled.

Why didn’t you increase it further?

That is not necessary for a successful collaboration. Aside from that, we were too far apart on price.

“We are also still feeling the effects that the unstable conditions in Iraq and Russia are having on the overall business climate. Both of them together are reflected in the truck sales.”

Wolfgang Bernhard, Daimler board member for trucks business

Despite Russia and the problems in the emerging markets, the outlook isn’t shaky?

We remain committed to the goal of making significantly more profits this year. Our aspiration is, over the medium-term, under normal market conditions, to achieve 8-percent yields.

A cornerstone of that is your program “Trucks Number One,” which you have said you have to readjust. How do you proceed?

We are very satisfied with the progression, and the targets will be reached. We will reach 70 to 80 percent this year. We will see the full effect of €1.6 billion next year.

Volkswagen is preparing to raise the competitive pressure on Daimler with its subsidiaries Scania and MAN. What is your expectation?

The situation is not new to us. We always take our competitors seriously, above all when there is speculation in the media over further consolidation measures. We are looking closely at what happens there.

At the IAA, a Chinese producer, Dongfeng, will exhibit for the first time. Must one fear the Chinese?

The Chinese have a very large domestic market: one million trucks over six tons per year. That is more than the American, Japanese and European market combined! That offers the Chinese producers huge advantages, which we must take very seriously in the medium-term. But I am less worried about the Chinese in Europe.

Where then?

In the emerging markets. They sell in Africa, in Latin America and Southeast Asia. The Chinese are offering these markets simple, but sturdy models. In Africa alone they are selling 75,000 mostly light trucks per year, with considerable growth rates. But not every market entry is crowned with success. What are often missing with Chinese producers are spare parts, service and maintenance. But one still must take them seriously.

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In Europe, more than anything, you must struggle with the authorities. Do you fear a tightening of environmental regulations in Europe?

In Brussels, there are new proposals and requests to tighten the limits. The CO2 emissions for transportation should drop by another 30 percent by 2030. At the IAA in Hanover we will present a white paper offering an integrated approach for that. We have optimized the consumption of our motors so much that this task can no longer be achieved by the truck manufacturers alone.

Who should help you?

In addition to the truck manufacturers, there are the producers of truck bodies and trailers, the haulers, the oil industry and the politicians who set the parameters.

And what do you expect from the government?

For many years we have been talking about whether or not the size and weight of the trucks should be changed, the keyword here is: long trucks. In a pilot experiment with more than 70 trucks, we determined that these trucks are completely normal for many million kilometers.

There are no safety risks, the trucks do not stand out at all. But there are many advantages: the haulers save 20 to 30 percent in gas with the long trucks and the traffic density is smaller. For Daimler that would not be a good solution: three trucks today would become two gigaliners tomorrow. True, we don’t gain anything with that at first. But from a macroeconomic and environmental perspective, this approach is the right one in order to make quick progress on environmental goals.

How realistic is it that politicians will allow these heavy trucks on the roads?

These trucks are not heavier, only longer. If we are serious about a CO2 reduction of 30 percent, then we finally need to seriously talk about their introduction. In some countries in Europe they have been in use for decades.

Are the producers and haulers going along with it?

We see it as food for thought. In my experience, the producers and most haulers are going along with it.

What else are you calling for?

We must renovate infrastructure. Our highways and bridges are crumbling. The renovations were put off, and now there is a large wave of problems coming. The truck toll hasn’t changed that. Since then, the governmental spending from tax receipts on transportation has steadily gone down. A truck toll was introduced and the tax money for transportation was pushed somewhere else. But the toll was meant to be “on top.”

In June you demonstrated a truck that can be guided by a computer. Do you really think they will be in use on the German Autobahn?

Through that we initiated discussions and showed what is technologically possible. The advantages of the system lie above all in its efficiency, namely gas mileage, and safety. The truck can always look 2 to 3 kilometers ahead, and adjust its speed to the traffic and route. The driver can complete other tasks, such as taking new orders and modifying existing ones. And the computer never gets tired or distracted.

Is the computer really the better driver on the Autobahn?

When I rode for the first time in an autonomous truck, the first 100 meters were a little strange. But one quickly gets a good feeling for what the system can do. Sure, for some that first moment triggers worries. But I am convinced that in five to 10 years we will see the first self-driving cars. If we don’t do that, then the Americans will. In Arizona you can already drive an autonomous car, by law. The change is coming.

In the end, a driver will still be able to step in. We envision that the driver can remain at the workplace, like a pilot in an airplane. But he is in a relaxed position, with the seat slightly turned. That will help above all on the Autobahn, under relatively orderly traffic conditions. By 2025 that is technically possible. The technology is already there and at reasonable prices, we already showed that with the S-Class.

What do the insurers have to say?

They are checking it. The question is, what do we have to prove, so that the insurance rates will get cheaper in the end, because the number of accidents goes down? Autonomous long-distance travel is attractive to everyone. It makes it possible for the driver to take on other tasks, he can plan ahead during the trip. The gas savings are especially relevant, there we are getting at least 5 percent better, and with an optimized trailer up to 10 percent. That is how it will turn into a business model.

Mr. Bernhard, thank you very much for this interview.

The interview was conducted by Markus Fasse and Martin Murphy.

Markus Fasse and Martin Murphy are both reporting on the automotive industry for Handelsblatt in Germany. To contact the authors: fasse@handelsblatt.com and murphy@handelsblatt.com

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