Daimler AG has followed in the footsteps of Volkswagen AG and dumped its longtime CEO, promoting in his place a veteran member of the company’s senior management who will also serve as the German auto stalwart’s first non-German CEO.

According to Bloomberg and the Financial Times, Daimler has appointed board member and development head Ola Kallenius to replace Chief Executive Officer Dieter Zetsche two years ahead of schedule as the company struggles with the fallout of a widening emissions-cheating scandal. The news drove Daimler shares lower in European trading.

Swedish-born Kallenius will take the reins in 2019 while Zetsche will be appointed to the company’s supervisory board in 2021, setting him up to eventually take over as chairman. Indeed, it would be difficult for Stuttgart-based Daimler to sever ties with Zetsche entirely, considering the role he has played in turning around the company following its de-merger from Chrysler in 2007, as the Street explains. Daimler is the world’s largest luxury car maker and also ranks among the largest makers of commercial vehicles.


Dieter Zetsche

Supervisory Board Chief Manfred Bischoff (who will be replaced by Zetsche in 2021) lauded the appointment, per the Street:

Zetsche, 65, is one of the most respected names in the global auto industry and has led Daimler since it demerger from Chrysler in 2007, driving the group to record sales and reestablishing the Mercedes brand after years of concerns over quality and performance. However, a series of profit warnings, and spats with German labor unions, led to a shorter-than-expected extension of his term in 2015. Zetsche has also struggled to drag Daimler away from Germany’s ongoing ‘diselgate’ scandal, which has prompted a European Commission investigation into possible collusion between the country’s biggest carmakers that officials say may have denied customer access to less-polluting vehicles.

“In view of the challenges presented by the transformation of the automotive industry, the supervisory board intends to prepare a suitable succession at an early stage,” the company said in a statement. “The Chairman of the Supervisory Board, Manfred Bischoff, will recommend the election of Dieter Zetsche as his successor as the Chairman of the Supervisory Board, taking effect at the end of the Annual Shareholders’ Meeting in 2021.”

“In order to comply with the two-year cooling-off period, Dieter Zetsche will therefore step down from his positions in the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, effective at the end of the Annual Shareholders’ Meeting in 2019,” Daimler added.

However, Daimler accelerated is management position as the company’s shares have shed nearly 25% of their value since the beginning of the year as Daimler has clashed with the Trump Administration over its trade war with China and Europe, which forced Daimler to slash its earnings outlook for the year as it has been drawn into the intensifying “Diesel-gate” scandal. The company earlier this year said it would recall some 774,000 vehicles over emissions-testing concerns. According to Bloomberg, 49-year-old Kallenius has been the heir apparent to Zetsche, 65, for several years, and indeed seems “like the logical solution” to replace the legendary CEO.

With Kallenius, Daimler is promoting a long-serving employee who has risen through the ranks. Kallenius previously served as the sales lead for the company’s key Mercedes-Benz division while also leading its AMG performance car division. Kallenius’ appointment as development chief at the end of 2016 was a clear signal that he was in line to succeed Zetsche, prompting then-Daimler trucks chief Wolfgang Bernhard to leave.

However, with regulators increasingly focusing on the company’s involvement in “Diesel-gate”, one could be forgiven for suspicions that Kallenius is being set up to bear the brunt of the criticism and consequences from the scandal, while Zetsche spends the next two years rehabilitating his reputation in preparation to retake the reins as chairman.

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