Daimler’s Decision To Spinoff Its Truck And Bus Division

ByMike Paul

Mar 5, 2021

Daimler trucks’ loyal customer will soon see the company churn out models rechristened ‘Mercedes-Benz.’ In a new announcement, the company revealed that it has decided to create a separate division for manufacturing trucks and buses. The motive behind the spinoff is to facilitate a higher degree of freedom in operations. Also, the production will focus on manufacturing zero-emission vehicles.

Why the spinoff?

According to the announcement from the company’s headquarters at Stuttgart, the present shareholders will have the majority of the stake in the truck business. With time, the spinoff company will manufacture trucks under the name ‘Mercedes-Benz’ – the same name as that of its luxury cars.

One of the reasons behind the said decision is due to the differences in the manufacturing processes. In the words of Ola Kallenius, the CEO of Daimler – “the businesses of making luxury cars and heavy trucks have very different structures.” With this division, both the companies can focus better on their respective manufacturing processes. Also, it gives each division more flexibility to make decisions faster. The company believes that it will help both divisions cope with technological changes.

This is an age where businesses need to make quick decisions. The spinoff will contribute to the same.

Another reason for the spinoff could be that different technologies are involved in manufacturing environment-friendly cars and trucks. As the company aims to reduce vehicle emissions, different approaches are required for cars and trucks.

In the luxury car business, new battery-powered models are expected to eliminate carbon emissions. On the other hand, truck manufacturers are encouraged to invest in hydrogen fuel cell technology.

The truck and bus division at Daimler – an overview

The company’s truck and bus division comprise a significant workforce – it employs more than 100,000 people. While the truck division makes Freightliner trucks, the bus division manufactures Thomas Built buses. The engines for the vehicles are manufactured at a special diesel facility in Michigan, the USA. The truck and bus division boasts of multiple manufacturing units spread across various locations globally – Germany, Brazil, Ohio, Portland, Cleveland, Sao Bernardo do Campo, Woerth and Gaggenau, and Oregon.

The division generates massive revenue as well. In the previous financial year, the truck and bus division collectively generated 44.9 billion euros – 40.2 billion euros from trucks and 4.7 billion euros from buses.

Operations post-spinoff

According to the official statement, the companies would cooperate while working on new technology even after the spinoff. With the company’s announcement, its shares rose, and it closed at 64.56 euros. Therefore, the company has a good reason to believe that the decision will look appealing to investors. The decision will be put forth in a shareholder meeting that is expected to take place in the third quarter of this year.

The bottom-line

As we move towards building an eco-friendlier world, all businesses must invest in environment-friendly solutions. Daimler has shown the way.

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