Motor City Blogman

Luxury in Transition: Källenius Replaces Zetsche as Mercedes CEO

And Cadillac moves back to Detroit

Dieter Zetsche gets two years off between his retirement next May as Daimler AG/Mercedes-Benz CEO and his ascendance to Daimler AG chairman of the supervisory board. The Daimler press release calls this “the two-year cooling-off period,” which as far as I can tell, is some sort of German corporate thing.

His replacement will be Mercedes’ first non-German CEO, the current R&D chief Ola Källenius (whose choice as successor was no surprise). At last March’s Geneva motor show, Källenius outlined Mercedes’ strategy to expand its lineup of relatively affordable compact cars based on the A-Class transverse-engine platform.

Affordability, or at least the commodification of Mercedes cars has been a sort of theme for at least half of Zetsche’s 42-year career under the Three-Pointed Star. A couple of decades ago, Mercedes-Benz made a philosophical shift from building cars to a standard, to building cars to a cost-point. That shift took a big toll on Mercedes’ vaunted reputation for quality, reliability, and solidity. When Zetsche became CEO in 2006, he promptly got to work fixing things.

This was immediately after Zetsche had spent about seven years—2000 to 2006— as DaimlerChrysler’s CEO of the Chrysler Group. While Metro Detroiters easily warmed to Zetsche’s “Dr. Z” character in TV commercials, as kindly purveyor of the modern Chrysler minivan, his image in Auburn Hills, Michigan, took a hit when Daimler quickly unloaded the American automaker to Cerberus for a fire sale $7.4 billion.

Daimler left Cerberus with an automaker drained of any aspirational qualities. Think Dodge Caliber or Jeep Patriot.

Conversely, under Zetsche, the Pentastar got the Mercedes-based Chrysler 300, Dodge Charger, Challenger and Magnum, and Jeep Grand Cherokee.

Zetsche has, somewhat inexplicably, held on to the Smart division even after other automakers unloaded unprofitable brands after The Great Recession. But since The Great Recession, under Zetsche, Mercedes-Benz has rebuilt its reputation for quality, while passing archrival BMW to become the global luxury car leader.

Daimler has split into three business units, raising the possibility it might spin off its very profitable commercial truck and bus business, while its Mercedes-AMG Formula 1 team has dominated the sport for four—possibly five—years. Watch for Zetsche, a true car guy with an engineering background, lurking about the Merc-AMG garages in world F1 race broadcast feeds.

After May 2019, Zetsche will leave Källenius a Mercedes-Benz that’s a leader, probably one of the top three companies in this case, in autonomous technology and also a strong player in electric vehicles. Combining those two technologies, Mercedes hopes to be the lead premium provider of shared economy and alternate ownership transportation. It’s the first major automaker to go back to producing inline six-cylinder engines, based off of I-4s instead of sharing components with V-8s, and will no doubt help lead the way toward battery-electric and/or fuel-cell powered semi-trucks.

Zetsche’s Mercedes suffers, in my opinion, from myopia toward diesel engines. He announced at the 2016 Geneva Motor Show a $3.35 billion investment in a new family of diesels, even as EU scrutiny continues to loom over Mercedes’ emissions testing.

The bottom line, though, is that Zetsche is leaving Mercedes in much better condition than when he took over as CEO.

Cadillac headquarters’ move from Detroit to New York City four years ago coincided with General Motors’ hiring of Johan de Nysschen. While stories have varied over the years over how much de Nysschen had to do with that move, the erstwhile Cadillac president and the glamorous location clearly went together like peanut butter and jelly.

But de Nysschen’s strong personality apparently clashed with other strong personalities in the GM boardroom, as well as with powerful Cadillac dealers, so last April, he abruptly left the Gotham HQ. Now GM is bringing Cadillac and its new president, Steve Carlisle (a GM lifer) back to the Motor City.

There is no indication that GM will reverse its most important move regarding its storied luxury marque, which was split off into its own business unit shortly after moving to New York and hiring de Nysschen. Making it an independent business unit was the important move, because it’s easier for Cadillac to make luxury marque expenditures, rather than costing in expenditures with Chevrolet, Buick, GMC, and their commodity margins.

To maintain some independence, Cadillac is not moving HQ back into GM’s Renaissance Center in downtown Detroit, which has a new sort of cache’ of its own, but to a building across from the GM Tech Center in the blue collar suburb of Warren, according to a report in Automotive News.

In a prepared statement, Cadillac says it “will maintain a brand presence in New York City with the Cadillac House, an experiential brand center which serves as a public space for events, concerts and collaborative partnerships until longer term brand plans are in place.”

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