SPIEGEL: Mr. Zetsche, what kind of company car do you drive?
Zetsche: It varies. Right now it's an S 600.
SPIEGEL: What kind of gas mileage does it get?
Zetsche: Just under 17 miles per gallon (14 liters per 100 kilometers).
SPIEGEL: You could drive a significantly more economical hybrid. But so far only your competition produces hybrids. Toyota already enjoys a much more environmentally friendly image because of this technology. Have you ever been envious of your competitor for this reason?
Zetsche: Certainly not for that reason, because our economical and clean diesel engines can certainly give hybrids a run for their money. But I do have respect for our competitors' PR and marketing efforts when it comes to their hybrids.
SPIEGEL: So it's all just clever advertising?
Zetsche: Not just that. But I also drive a Smart as my personal vehicle. It consumes a lot less gas than any Toyota.
SPIEGEL: The Smart is your company's most economical model, but also one of its least successful. The project has supposedly cost more than €5 billion ($7 billion) to date. How much longer will you stick with the Smart?
Zetsche: It's true that the Smart has cost the company money in the past. But if it didn't exist, we would have to invent it now. But it's also true that it has always been very successful in the market. We will be in the black with the Smart starting this year.
SPIEGEL: The hybrid engine is the first new type of automobile engine to come on the market in more than 100 years. But a Japanese manufacturer is responsible for the new engine, not Daimler, the company named after the man who invented the first car. Why did you fall asleep at the wheel?
Zetsche: It just so happens that we are the market leader in the hybrid segment ...
SPIEGEL: How so?
Zetsche: ... but only in the city bus sector, where I believe the hybrid makes the most sense. Because it is constantly accelerating and braking, a bus represents the most efficient use of hybrid technology. There are many other technologies, such as direct fuel injection, Diesotto, Bluetec and the fuel cell, which we are also pursuing. Nonetheless, we are no longer developing any cars without a hybrid option.
SPIEGEL: Out of conviction or because that's what the market wants?
Zetsche: Out of conviction that it's what the market wants. But I also have to say this: Some are currently touting the hybrid as our only salvation when it comes to automotive technology. It can't be, partly because the higher price limits its marketability. We expect worldwide hybrid sales to increase to 1 million cars by 2010. That would be just under two percent of total automobile sales. Compare that to the worldwide production of clean diesel vehicles -- about 13 million in 2010.
SPIEGEL: But your company, together with BMW, is also developing hybrid engines, and you plan to unveil 19 environmentally friendly models at the International Auto Show (IAA). Why have you waited so long?
Zetsche: We already decided which models we would be showing at the IAA two years ago. But the important issue is that we now have a modular concept that allows us to combine optimized gasoline engines and Bluetec diesel with hybrid options at will. And we will also provide specific dates for our market introductions.
SPIEGEL: Nevertheless, Mercedes-Benz still lags behind on environmental protection, even with its conventional engines. BMW scored the top five slots on a list of the most economical models in the mid-sized luxury class. Mercedes doesn't even make it into the top 10.
Zetsche: You shouldn't just be looking at certification figures, but also at real auto tests. That's where the differences among the individual models amount to less than one mile per gallon (a half liter per 100 kilometers).
SPIEGEL: Are you saying that standard fuel consumption tests are unreliable?
Zetsche: No, but standards and reality are not always the same thing. I consider our company to be highly competitive in all areas. We have reduced fuel consumption in our lineup by 30 percent in the last 15 years -- more than any other carmaker. We also have the potential to do better than that. And we now plan to improve fuel efficiency even further.
SPIEGEL: But your competitor, BMW, leads the pack of German manufacturers when it comes to fuel efficiency, right?
Zetsche: Certainly not as a rule, but perhaps on individual levels. That's just the way competition works. Sometimes one company is the leader, sometimes another. We are clearly the leader when it comes to the world's cleanest diesel technology, Bluetec, as well as in fuel cell technology.
SPIEGEL: Could it be that the population's environmental consciousness is developing at a faster pace than technology?
Zetsche: Fuel consumption has become an important tissue, but it is not the only criterion by which we measure the quality of a vehicle, nor will it be in the future. Other criteria that help us boost the emotional value of our cars for our customers are safety, comfort and performance.
SPIEGEL: Everyone is calling for economical cars, and yet gas-guzzling SUVs are booming in Germany. Does the consumer have a split personality?
Zetsche: There simply is no typical consumer. But many of our customers, even those who buy SUVs, have long opted for the clean and economical diesel engines we offer for these models. Of course, there are also drivers who always want the sportiest and most powerful version, while at the same time insisting that cars should not be allowed to have any CO2 emissions anymore.
SPIEGEL: Can you explain this contradiction for us?
Zetsche: We shouldn't complain about it. The success of companies like ours is not based primarily and solely on the rationality of our customers. Emotions and enthusiasm are at least equally important.
SPIEGEL: It sounds as if you also benefit from the stupidity of customers?
Zetsche: It has nothing to do with stupidity. What it boils down to is that we also sell emotions, dreams and desires.
SPIEGEL: Is German Chancellor Angela Merkel also selling emotions when she makes climate protection a cornerstone of her policies?
Zetsche: I applaud what the chancellor is doing. She also seeks dialogue with the industry. In essence, it is in everyone's interest, just as it is everyone's responsibility, to reduce emissions of CO2 and other gases, because there is clear evidence that there is a relationship between carbon dioxide emissions and climate change. But the important thing is to achieve the greatest possible effect with as little effort as possible. Transportation must make a contribution here. But I would emphasize that it is one of many contributions.
SPIEGEL: Does the CEO of Daimler also discuss climate change within his own family?
Zetsche: I would be lying if I said that we focus on it constantly. But I have two nieces who are very involved. I like to discuss the issue with them, although I am both unable and unwilling to convince them that we are at the forefront of the environmental movement.
SPIEGEL: Is this something Daimler is even capable of? After parting ways with Chrysler, you now produce only 1.3 million cars a year, to which you have to allocate your development costs. Toyota produces more than 9 million cars a year. How can you expect to keep up?
Zetsche: Volume alone doesn't say much. Our sales are quite close to Toyota's. With about €100 billion in annual sales, we can afford to spend €3-5 billion a year on R&D. You can get a lot done with that kind of money, especially when you employ the world's best researchers and developers, as we do.
SPIEGEL: BMW invests significantly more in R&D for each car they sell than Mercedes-Benz.
Zetsche: The key issue is not how much money I invest, but what comes out in the end. In this respect, we have learned a great deal in the last few years. The fact that we achieve higher sales per vehicle than BMW indicates that our customers are paying for the additional value.
Working Together with the Competition
SPIEGEL: Innovation becomes cheaper when you split the costs with others. Are your hybrid joint ventures with BMW only the beginning?
Zetsche: There are two advantages to cooperation on specific levels: It reduces costs and working together allows both parties to reach their goals more quickly. The risk of joint ventures is that they can dilute the differences between two brands. This is something we have to take into account. Mercedes will remain the most valuable and desirable brand. We do not see cooperation as an absolute necessity, but certainly as an opportunity. I am completely open to this approach, although I would not take it as far as Toyota, which sells two almost identical cars, one under the Lexus name and the other under its mass-market brand.
SPIEGEL: How far along are your talks with BMW and the French PSA Group (Peugeot Citroen) over whether your next A and B class could be a joint venture?
Zetsche: We are discussing a wide range of issues with various parties, and we are examining our options completely without emotion. But we have not reached any conclusions yet.
SPIEGEL: Could you imagine BMW and Mercedes developing an engine jointly?
Zetsche: Sure, why not? The Porsche Cayenne also became a success with a VW engine. But interestingly enough, the facts are only somewhat relevant when it comes to engines.
SPIEGEL: Customers' emotions are also the issue there
Zetsche: ... and we take them seriously. But let me say it again: I do not want to rule out such cooperative arrangements, if they make sense for both sides -- in other words, if it's a win-win situation.
SPIEGEL: Wouldn't BMW be the best fit for a partnership?
Zetsche: On the one hand, the risk would not be insignificant, because we operate in the same segment. On the other hand, the opportunities are also especially big, because we produce vehicles that are similarly sophisticated from a technological standpoint.
SPIEGEL: The Quandt family, a major shareholder in BMW, once held about 15 percent of Daimler's shares. Could you imagine having that kind of cross-holding again as a way of promoting cooperation?
Zetsche: No. There was a time when all it would have taken was one vote and Daimler would have acquired BMW. This would not have been good for either company. But as I said, I do not rule out joint ventures. However, no decisions have been reached about additional projects, and everything else is just speculation.
SPIEGEL: Not too long ago, you said that Mercedes-Benz needed Chrysler to provide security. Costly innovations, you said, would only be worthwhile if they were first used in the luxury class and later in mass-market vehicles.
Zetsche: Yes, I did say that. But I discovered that we were able to generate fewer synergies than expected, because the Chrysler customer was unwilling to pay a premium for additional technologies. On Sept. 1, we are a more secure company than we were on March 1. The key difference is that while Chrysler is no longer part of the group, we can continue to implement joint projects. The new Daimler is in an excellent position.
SPIEGEL: But the separation from Chrysler didn't solve all your problems in one fell swoop.
Zetsche: We have achieved even more in the last 18 months. Quality is back on track at Mercedes, and we have become more efficient at the same time. We have made improvements to our commercial vehicles. We have reduced our stake in EADS. And we have also made management more streamlined and faster. The company is on an excellent course overall. The outlook is good for all of our business. That's the future.
SPIEGEL: Your predecessor had great visions. But in the end, Jürgen Schrempp's concept of building a global car company together with Chrysler failed miserably. Are you willing to take the gamble of having a vision?
Zetsche: I have very specific goals for Daimler: As many people as possible should dream of driving a Mercedes, and if they can afford it, they should make this dream a reality. I want us to be especially attractive as an employer. I want it to be a smart idea for investors to put their money in Daimler shares. And I want to see the media write about us with respect and recognition.
SPIEGEL: That sounds a lot more down-to-earth than your predecessor ...
Zetsche: ... if you think so -- I'm not ashamed of it.
SPIEGEL: What have you learned from the nine years of the DaimlerChrysler global corporation?
Zetsche: Perhaps that one should always question one's point of view. And that size isn't always the most important criterion.
SPIEGEL: Schrempp has even profited from the breakup of his global corporation. Your stock price is rising, which is good for his stock options. Is this fair?
Zetsche: I cannot be a judge of fairness in this case. The supervisory board determines our salaries. How much Jürgen Schrempp gets in the end will also depend on when he exercises his options.
SPIEGEL: The Chrysler chapter hasn't ended for you yet. Daimler still holds just under 20 percent of Chrysler stock. Cerberus, a private equity firm that promptly installed a particularly aggressive chairman and CEO to clean up the company, holds the remaining 80 percent. Was this discussed with you?
Zetsche: I found out after the decision was reached but before it was made public.
SPIEGEL: Not exactly a civilized approach.
Zetsche: We discussed the issue. I do think it's legitimate for a new owner to install new executives.
SPIEGEL: But isn't Chrysler's future even more uncertain now than it was before?
Zetsche: No. I am completely confident that Chrysler will be a well-functioning company. And we at Daimler have managed to remove healthcare costs and pension obligations totaling almost €37 billion from our books. The net liquidity is so high that we can now return some of the shares to our shareholders through the stock buyback program. I am very satisfied with the deal overall.
SPIEGEL: What will be the consequences of the crisis in the global financial markets for the economy and consumption?
Zetsche: This crisis is presumably not over yet, but I believe that the risk of a real recession is low.
SPIEGEL: Mr. Zetsche, we thank you for this interview.
Interview conducted by Dietmar Hawranek and Thomas Tuma.