September 26, 2018 / 6:09 PM / in 23 days

Daimler's new CEO adds international flair to Mercedes

FRANKFURT (Reuters) - Daimler’s (DAIGn.DE) appointment of company veteran Ola Kaellenius to become chief executive from next year signals a cultural shift by the world’s oldest carmaker as it takes on new rivals from the tech sector.

FILE PHOTO: Ola Kaellenius, a board member of Daimler AG at the Frankfurt Motor Show, September 12, 2017. REUTERS/Kai Pfaffenbach/File Photo

A 49-year old Swede, Kaellenius is the first non German CEO to head up the 132-year-old Stuttgart-based inventor of the modern automobile. He also lacks an educational background in mechanical engineering.

With his international experience he embodies a more informal leadership style as Daimler seeks to embrace Silicon Valley management tactics to compete with tech rivals like Waymo and Byton in a race to put self-driving cars on the road.

“The hearts of our vehicles used to be drivetrains, in the future it will be their hard drives,” Kaellenius said in a speech at the Consumer Eletronics Show in Las Vegas this year, an appearance which appeared to signal that he represented the new face of high-tech Mercedes-Benz.

Like Dieter Zetsche, who is set to take over as Daimler’s chairman in 2021, Kaellenius excels at impressing international audiences. His polished but casual approach - with no suit or tie - echoes a management style more at home in California than Germany.

FILE PHOTO: Ola Kaellenius, a board member of Daimler AG at the Frankfurt Motor Show September 12, 2017. REUTERS/Kai Pfaffenbach/File Photo

Kaellenius joined Daimler as a trainee in 1993 and moved to work in corporate controlling at Mercedes-Benz in Tuscaloosa, Alabama before further postings at performance division Mercedes-AMG. He became a management board member for Mercedes-Benz Cars Marketing and Sales in 2015.

Critics say his emergence as Zetsche’s heir apparent in the past two years has happened when Mercedes-Benz has enjoyed record sales and profits, sparing Kaellenius and Daimler’s management board fights with labor representatives.

Mercedes-Benz overtook BMW (BMWG.DE) to become the world’s biggest selling luxury car brand in 2016.

Kaellenius did restructure the Mercedes dealership network, but critics say this happened when vehicle deliveries reached record levels, reducing the need for painful cuts.

“Until now cooperation with Ola Kaellenius and labor representatives has remained constructive and we therefore expect it to remain that way in this new constellation,” Daimler’s works council chief Michael Brecht said.

Kaellenius does have his work cut out for him. Daimler issued a profit warning earlier this year, hit by the rising cost of trade tariffs and problems getting the Mercedes vehicle fleet to conform to stricter anti-pollution standards.

Global auto sales are starting to wane and industry profits are being crimped by heavy investments into electric cars.

Daimler now faces scrutiny from regulators and prosecutors about diesel pollution as part of a broader clampdown on toxic fumes which has seen customers shun diesel cars, leaving German workers worried about jobs tied to engine assembly.

In 2013, labor leaders, who command half the seats on the company’s board of directors, opposed deeper restructuring measures and forced Zetsche to reassign cost-cutting specialist Wolfgang Bernhard as a condition for extending his contract as CEO.

Zetsche did push through several restructurings in the last decade to try to restore the premium status of the Mercedes-Benz brand in the wake of an expensive merger with mass market manufacturer Chrysler.

Kaellenius, who has a qualification in international management from the Stockholm School of Economics, and experience in the United States, has introduced Silicon Valley management techniques at the carmaker to speed up the pace of innovation to keep up with the software industry.

Currently Head of Group Research and Mercedes-Benz Cars Development, Kaellenius has helped Zetsche to sweep away layers of bureaucracy and encourage a more experimental approach to new products, changing a culture of strict hierarchies and meticulous planning.

“Kaellenius has been crown prince for a while, and he represents change. He is young, intelligent, has a good management style and is simply a different kind of animal from many other top managers in the auto industry,” Juergen Pieper, an analyst with Bankhaus Metzler said.

Reporting by Edward Taylor, Ilona Wissenbach and Jan Schwartz. Editing by Jane Merriman

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