Q&A: Cordes says he's leaving DCX truck business on an upswing

Stuttgart. Eckhard Cordes has revitalized DaimlerChrysler's commercial vehicle sector. Before starting his new job as head of the Mercedes Car Group, he talked about the economic upswing, areas of growth and safety systems for heavy trucks with Automobilwoche's Gerhard Mauerer and Franz W. Rother.

The commercial vehicle business has increased during the first half of 2004, after a long slack period. Will the second half be similar?

2004 will be a year of economic upswing as a whole. I expect 8 percent growth in western Europe. The markets in Latin America are also developing very well. And business is booming in the Near and Middle East.

What do you expect for those markets in the medium-term?

The development in the Near and Middle East will probably not remain at the current level. I am more confident in regard to the prospects in western Europe and I believe that the market will continue to grow in 2005. And I am even more optimistic with respect to the NAFTA regions (US, Canada and Mexico), where our commercial vehicle sector is making most of its sales. I expect an upswing that will last at least until 2006. However, I do not want to forecast how high it will be.

What will the commercial vehicle sector's share of the group result be in 2004?

During the first half our operational profit of 736 million euros was significantly higher than last year. The total result for 2004 will also be better than that of 2003. My sector will represent a significant share of the total result.

Does that mean that this year you will achieve the internal target margin of 13 percent on the invested capital after only 10.6 percent in 2003?

We do not make advance comments on the individual divisions. However, I am very satisfied with the general development. We will definitely improve compared to 2003.

Can you keep up with the demand?

The experiences of the last few months are new to me as commercial vehicle chief. The level of capacity utilization is very good at all plants. So far we have not had any delivery bottlenecks.

In which regions would you like to generate growth?

On one hand we will enter new markets with our existing product portfolio. We will be building our three delivery trucks - Sprinter, Viano and Vito - in China starting in 2006. We might also increase the export of Fuso vehicles to southeast Asia. We also strongly believe in our future joint venture with our Chinese partner Beiqi Foton, which will hopefully start production by the end of 2005. However, the market for premium trucks is very small there. That is why we will offer three variations of trucks. The cheapest truck series will have Chinese cabs, chassis and suspension and powertrains. The medium version - the so-called mixed trucks - will have Mercedes-Benz powertrains and the top version will be Mercedes-Benz pure.

What is happening with pricing?

We managed to stop the price decrease in western Europe after five years of dropping customer net prices. In some cases we even managed to reverse them. The new Actros made a big difference. At its market launch we expected a loss of market shares. However, the opposite happened. Our market share has slightly increased despite higher prices.

What is the situation like in North America?

I would welcome a higher price level there. However, we also returned to profitability in North America - mainly by dramatically cutting costs.

Looking at the scandals around Mitsubishi Fuso and the 47 imminent recalls, was it the right decision to become the majority stockholder?

Definitely yes. Our sales share in Asia will soon increase to more than 20 percent from approximately 5 percent in 2003 due to Fuso. And the image loss is limited. Our customers trust us that the new management is focusing on quality more than ever. You should not forget that those mistakes were made in the '80s and '90s, therefore before our time. We also benefit from the fact that commercial vehicle customers behave in a rational way rather than an emotional one. If there weren't the costs for the recalls, Fuso would achieve a very significant improvement in regard to results.

Will your successor Andreas Renschler have an easy life now that you have fundamentally revitalized the sector?

There is no end to it. The focus will always remain on the costs. The difference is that in the future it will be more about process optimization rather than cost reduction through closing down plants or redundancies.

At the commercial vehicle IAA in Hanover you introduced a Sprinter with hybrid engine. Was this model only for display?

Not at all. We are working intensively on developing alternative motors which are intended for series production. Just think of our Sprinter with fuel-cell propulsion. I believe that hybrid engines have a future - until the fuel cell is ready for series production. And that will take another few years. Hybrid engines make a lot of sense in stop-and-go traffic. Our customers should have the choice between different concepts.

Is there room for further consolidation in the industry?

In western Europe there is not one manufacturer with a market share below 12 percent. It is similar in the NAFTA regions and Japan. There is no classic takeover candidate. We are definitely not looking for any partners, especially as our production volume is a lot higher than that of the competition, which means we would reach the antitrust law limits on most markets.

DaimlerChrysler is considered to be the innovation leader in vehicle safety. But a majority of customers do without many of the safety packages. Would an obligation by law for haulers make sense?

This is a difficult subject. I can only say that when a truck driver falls asleep at the steering wheel for example - we have developed a solution. We will soon be launching vehicles that will have the option of a fully automated brake control in the case of the driver falling asleep. It would not be standard as many customers would not pay for this. And there lies the problem. We are already offering several safety systems at special prices, but the demand is limited. I hope that the insurance industry will contribute to a further spreading of those safety systems. So far it has not been very successful.

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