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Daimler will create stand-alone truck business

Long-considered move follows Volkswagen AG’s similar action in 2019

Daimler AG is splitting off its trucks business into a separate entity. (Photo: Daimler)

Editor’s Note: Updates throughout with additional information

Daimler AG (OTC: DDAIF) plans to create a separate company for its Daimler Truck business that would focus on zero-emissions vehicles and software that could lead to autonomous trucking.

The decision by Daimler’s supervisory board to move forward follows several years of discussion. The German newspaper Handelsblatt reported in December that Daimler was considering acting before the end of 2021. Shareholders will vote on the spinoff at a special meeting in the third quarter.

The Daimler Group paved the way for Wednesday’s action when it separated the car and van and the truck and bus businesses into two subsidiaries in November 2019.

Daimler Truck & Bus, created during the reorganization, is a global leader in sales of Class 8 and other commercial vehicles. It will have its own independent management. Stand-alone corporate governance would include an independent chairman of the Supervisory Board. It is expected to trade on the Frankfurt Stock Exchange by the end of 2021.

Daimler to become Mercedes-Benz

Additional details emerged following a Supervisory Board meeting Wednesday.

  • A significant majority stake of Daimler Truck would be distributed to current Daimler shareholders. Daimler would retain a minority stake in the new company.
  • It will eventually rename Daimler as Mercedes-Benz, a luxury car business, committed to leading in electric drive and car software.
  • Daimler Truck would continue efforts in zero-emission battery-electric and hydrogen fuel cell electric propulsion  .
  • Captive financial service teams of Daimler Mobility would be allocated to the
    Cars & Vans and the Truck & Bus businesses.

“This is a historic moment for Daimler. It represents the start of a profound reshaping of the company,” said Ola Källenius, chairman of the Board of Management of Daimler and Mercedes-Benz. “Mercedes-Benz Cars & Vans and Daimler Trucks & Buses are different businesses with specific customer groups, technology paths and capital needs.”

Truck unit could be worth $35 billion

Daimler Truck consists of seven brands: BharatBenz, Freightliner, Fuso, Mercedes-Benz, Setra, Thomas Built Buses and Western Star. It has more than 100,000 employees in 35 main locations globally.

The truck unit could be worth about $35 billion if it is valued at multiples similar to those used for Volvo Group (OTC: VLVLY), Deutsche Bank wrote in a January report reported by Bloomberg. Daimler’s truck division contributed more than $48 billion in revenue to Daimler AG in 2019.

“We are convinced that the capital markets will appreciate the opportunity to invest in more clearly focused, pure-play businesses,” Supervisory Board Chairman Manfred Bischoff said.

Spinoff has precedent

Rival Volkswagen AG spun off its Scania and MAN truck businesses into a holding company called TRATON SE (8TRA.D.DX) in 2019. It now has a market value of about $14 billion. TRATON is expected to close on a $3.7 billion acquisition of Navistar International Corp. (NYSE: NAV) in March.

“Trucks are better off by themselves,” IHS Markit trucking analyst Antti Lindstrom told FreightWaves. “It’s easier to raise capital that way.”

The transformation of trucking from diesel power to battery-electric and hydrogen-powered fuel cells for long haul is expensive. Daimler Trucks North America (DTNA) is testing 38 Class 8 eCascadia and Class 6 eM2 battery-powered trucks with fleets in the U.S. and Canada. It plans to begin selling the trucks in 2022.

Daimler and Volvo formed a joint venture last year to make fuel cell trucks for both brands. They are targeting the second half of the decade while also working on stationary fuel cells for data centers and other uses.

DTNA is leading the company’s global efforts in Level 4 autonomous trucks that can operate in most instances without a human driver. It acquired software maker Torc Robotics in 2019 and is working with Waymo, the autonomous vehicle unit of Alphabet (NASDAQ: GOOGL).

“With independence comes greater opportunity, greater visibility and transparency,” said Martin Daum, chairman of the Board of Management of Daimler Truck. “We have already defined the future of our business with battery-electric and fuel-cell trucks, as well as strong positions in autonomous driving.”

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Click here for more FreightWaves articles by Alan Adler.

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Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.