Dieter Zetsche - Chairman Daimler AG and Head of Mercedes-Benz Cars HARDtalk


Dieter Zetsche - Chairman Daimler AG and Head of Mercedes-Benz Cars

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mistreated. That's it from me for this hour. For

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now it is time for HARDtalk. Welcome to HARDtalk, I'm Stephen

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Sackur. Today I am in Stuttgart, Germany, a city with a long history

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of engineering and manufacturing. The auto industry is a major player

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here, and you can see signs of it all over town. Which is good news

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for Stuttgart, as long as the German car industry continues to thrive. My

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guest today is Dieter Zetsche, the boss of Daimler AG, the makers of

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Mercedes-Benz cars. The company, of course, with a global reputation.

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But over the past decade they have made some costly mistake. They still

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face some major challenges, not least the push for greener, more

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efficient vehicles. Yes, Daimler AG have a proud reputation. At with a

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have a bright future? -- but does it have.

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Dieter Zetsche, welcome to HARDtalk. Innkeeper having me. Peewee stick in

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the headquarters of Daimler AG. Strikes me that this isn't the right

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place to be if you have global ambition. -- here we sit. Yes and

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no. On the one hand, of course we are a global company and we want to

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be present around the globe. On the other hand, our strength is our

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brand. And one important character of our brand is being German. White

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but let's be honest about where Europe is today, car sales have

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slumped in the last six years. They have come down massively across

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Europe. Still in Germany and France they went down last year. If you are

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ambitious about global growth. Europe is the last place you want to

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put your focus. It is true what you are saying that at the same time we

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are selling more cars in Europe today than we did six years ago and

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we are still selling more cars in Europe than between US and China

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combined. So... I'm talking about growth potential. Absolutely already

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from eight demographics point of view. Growth will come from emerging

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markets. From the US as well. Still, the volume we sell here is so

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significant that it is important to deal with that. But no business

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leader rest on his laurels and always looks to tomorrow. A simple

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question, you know how old the average buyer of a new car in

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Germany is today? It is close to 50 years. 52.2 years. That's a disaster

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to you. No. First of all, customers of that age a more affluent.

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Everybody should be jealous about us having a very strong foothold in

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that part of the population. At the same time, when you want to grow you

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have to look for younger customers. New car sales in general are being

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realised not by the youngest who either have no car or a used car,

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but clearly, when you want to be there in 20 and 30 years, you have

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to win the young customers today, which is what we do with our new

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product. What you are when you talk about people relying on used cars,

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your company is indeed moving into the car share business as well, it

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seems to me you are acknowledging that in the more developed

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economies, the assumptions about everybody owning a car, using a

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car, they are a thing of the past. That is true again. So why would

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they want to invest in your company when it seemed like you are a

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Somerset industries? Yum I've been in this princess for 40 years and I

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can't remember a time when growth prospects were so positive. That is

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not because of growth potential in Europe, but because of the emerging

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markets where more people get to a level of wealth where they can

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afford to buy a car and they are as excited about the first car as

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Europeans were in the 1950s and 1960s. That is a huge amount of

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potential. That is where we are benefiting. It is interesting that

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you are agreeing with my first proposition that it's not here that

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your focus has to be. But I do want to stick with thoughts on Europe for

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a moment longer because you are one of the longest serving and

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best-known corporate leaders in Europe's today. I want your

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perspective on what is happening on this continent. It seems to me that

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Europe has a profound set of structural economic issues, many of

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them not necessarily in Germany but in surrounding countries, when you

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look as an industrialist and an investor, what do you think the

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biggest problem is? We have to overcome our fiscal problems. It is

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difficult to have good fiscal situation and at the same time see

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the economy being in a slump and see the need for some incentives for

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growth in the industry or economy altogether. We have come through the

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worst. Most countries have made some progress in Europe in this regard.

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We can now afford to start incentivising. Better by a reduction

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of our state's restriction rather than just by deficit spending. Do

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you think the state plays far too intrusive a role in Europe? It is

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always a pendulum. We had a time in Europe where many people thought

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very liberally and wanted less government unless state. There were

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some extreme consequences like the financial crisis. -- and less state.

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Many people do believe again the government must intervene in

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Moorfields which definitely is not a right recipe to follow. That Mac

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more fields. Why is so much of Europe failing to get anywhere close

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to Germany in terms of competitiveness and economic

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success? Competition is what drives success. I think in Germany, in most

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parts of the time, the Government held back in interfering in

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business. It let competition work. In some other nations there was more

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protectionism and more interference by the Government and the result is

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austerity. When you look at your work is in your French plants or

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your Hungarian plants, do you think they are lazy ? Certainly not. In

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hungry we had a similar quality level for comparable cars as we do

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in our plant in Germany. What about France? In France we have a

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different model. We only have a few hours on the car being done and then

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we have supplied is positioned around. I would not agree with the

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American tyre manufacturer send a letter complaining about French

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workers. I don't think it is about the people but about the system and

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some of the direction the system has taken four years which I disagree

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with. I think more fresh wind and competition helps you in the long

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run but it might be difficult in the short term. It is like practising in

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your basement every day, that is what we need in our companies and

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that is what we have been faced with in Germany for many years. Reading

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between the lines, you are saying that French political leaders have

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got things wrong in their economic management over the years. I wonder

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whether you would acknowledge that you have got things wrong over the

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last decade in Daimler AG, particularly thinking of the

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billions and billions of euros or dollars that you poured into the

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tie-up with Chrysler which turned out to be a disaster. It is easy to

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come up with this situation. I made the decision to separate the company

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's. But you were instrumental in the tie up in the first place. I don't

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want to hide that. I just said, in hindsight, it was obvious it did not

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create value. At that time, there was a board I was a member of, not

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leading but a member, which decided to join forces with the company

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which was at that time strong. When I went over there, we got a

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significant revival, with setbacks, but when I saw there were no

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firewalls at Daimler or Chrysler, against any risk, I saw the upside

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potential and downside risk, there was only one decision for me. That

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was to split immediately. What did it cost? Some people said $30

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billion. The merger created a delusion for the Daimler

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shareholders so that a higher number of shareholders were left after

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selling off Chrysler. 30 billion the loss less yellow haven't made a

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calculation but it was substantial. That was substantial. I'm getting,

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in a way that is history, but I am getting to the other element of the

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German economic model. It seems to me that many countries, having

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overseen such a terrible corporate failure, they would have been a

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desire to sweep away a whole generation of top management, and of

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course you were by then the top manager, at the apex of the company

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's. Why do you think you managed to hang on to your job and that there

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wasn't this sweeping out of the entire generation of leaders? I'm

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not someone who is defensive and tries to defend the past. I am

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responsible for this company for eight years. When I took over, we

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had significant challenges within the company. The liability for

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Chrysler was one of them. We had quality problems. Our product

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portfolio was poor. We had design criticism. Many things. Together

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with my colleagues I addressed these issues and today we are a company

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which is very strong and has high equity as dart equity and a product

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range. We can follow up with production capacity and we had a 52%

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increase in stock price last year which was not too bad. All of that

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is true, but you are still lagging behind. If you look over a decade,

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you are lagging behind your premium market competitors at BMW and Audi,

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VW as well. I wonder, you now say you are determined to make Daimler

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Mercedes-Benz number one x 2020. I am wondering how that can be

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realistic given you where you are now. We were the fastest growing

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manufacturer last year. We had two decades were we had different

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directions between a technology company for ten years and another

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company for ten years. I refocus the company on automotive and... The

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idea you were a broad technology company and the idea that you would

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diversify and use Chrysler and become in that sense a global

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conglomerate, you have had to junk both of those core strategy. We can

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study that merger and see what conclusion we can take. That is

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fine. But looking at today, we are moving fast. We are selling more

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cars than BMW or Audi outside of China. I was going to say, what

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about China? At the beginning of the conversation you may recall it was

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about the degree to which you have to be focused, like a laser beam, on

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your biggest growth potential market and China is number one. In China,

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this is your words, the biggest element of our profitability gap

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remains China. We are in poor condition in comparison to Halep

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peer 's. They are your words. -- to our peers. We came 20 years later to

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China than Audi did. We were four years behind BMW. We were catching

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up, matching BMW. Three years ago, we got into a slump. The others were

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growing and we did not. The analysed the reasons and addressed them. We

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had 45% growth in January. We addressed the issues. We fixed them.

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I am convinced of that. That is about product. The product is now

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received in China very well. With the C class come and we will start

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to catch up and get closer to our competitors as well. There is one

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important question Chinese consumers are asking of companies like yours,

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from the websites. They say we pay 150% more for the same car that can

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be bought in the United States or Europe? Why such an incredible

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markup? On the cars you sell in China? Nobody of us is making 100%

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profit. We are talking about different cost structure. A good

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portion of that being addressed all created for instance bike customs

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when we talk about importing cars. That is not all about it. An

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electric car company cares for his issued a fair price challenge in

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China. They say they can sell their product at 50% more than Europe,

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taking apart transport and Customs costs. Looking at companies doing

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business in China, it is profitable for us but not profitable at the

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percentage you are mentioning. We are talking about the low two digit

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margins. Again, this is about the order of rural cost structure we are

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facing. We have two face on productivity gains in China all the

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time as well which we are doing. Today we are implying more people in

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China, more cars are produced in Europe and the US and we have to

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work on this issue. Let's shift focus and talk about and by mental

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challenges. We are at an impressive Mercedes showroom, bigger cars all

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around us. Many of which are not the most fuel-efficient in the world.

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Germany just last year, went to the European Union and demanded a delay

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in the imposition of emissions Carbon targets for new cars. Targets

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were supposed to be in place for 2020 after pressure from Germany,

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that was put back to 2024. Your company was named as one of the key

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lobbyists behind the German move. Why did you do it? We are offering

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the most fuel-efficient vehicles in every segment on a global basis.

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With the German industry and Mercedes as well. We are offering an

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S class with a plug in hybrid with less than 70 grams per hundred

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kilometres. My point to you is, to reach these targets, was 95 grams

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per kilometre, he wanted to be introduced by 2020, you would have

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to accept, these big cars and not the future. Let the answer to your

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question. The fact is, the discussion was not of the 95 grams

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carrier but it was about very minor issues to which electric cars would

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have a multiple of 1.5 or two being counted as part of this average. One

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environmental campaigner in Brussels said the resulting fudge was the

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result of naked power politics played by Germany? And backed by you

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and BMW and the big carmakers in? Festival, we'll let interest and a

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very valid interest to reduce the tier two emission vehicles as fast

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as technically and economically possible. We are making tremendous

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progress in this regard. No one has a higher percentages of reduction in

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the last ten years than Daimler. Secondly we are talking about

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differences which are almost marginal between the manufacturer

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who sells mostly for the size or a manufacturer like Portia Boros sell

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more vehicles at the high side. We are investing so much in technology

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that the resulting difference, in spite of the physics, it is a bigger

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machine in the first place with additional technology, we are

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reducing this gap to almost a minimum. Talking about five or ten

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grams difference. That is only politic to highlight that and has

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nothing to do with the real CO2 emission which results. I tell you

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what is also about politics, your decision to hire a junior minister

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who worked in Chancellor Merkel's office. He is now your chief

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lobbyist. Germans are very worried about this. They see a dangerous

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revolving door developing where conflict of interest appears to be

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very real? There is a real problem in Germany that we have not enough

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exchange between politics and industry as we have two higher

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extent of macro other countries. Very very few politicians have had

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time in industry. It would be much better for future understanding. In

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abstract I can understand that, practically what do you expect from

:20:25.:20:29.

home. Why have you-? He has such a close relationship with Angela

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Merkel? I do not need him to talk to Angela Merkel. I can take the call

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and she will answer in reasonable timeframe. Of course, when we have

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somebody who deals with our relationship to governments around

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the globe, and Germany made the point that is not important to us

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any more. Politics in other countries of the world are at least

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as important. We need somebody who has understanding of our politics

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and ideally has been a politician for some time himself will stop that

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is why he is the perfect choice for us. Not because he would have

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influence on anything. He knows his business and therefore can act on

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our behalf. We are almost out of time, you have spoken in visionary

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terms about a couple of ways in which you see industry develop. One

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is in terms of self drive, autonomous vehicles that do the

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driving for themselves the driver can sit that can play on his laptop

:21:31.:21:34.

or whatever else he wants to do. How realistic is that? What kind of

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timeframe are you talking about? We are pursuing emissions free driving

:21:43.:21:45.

and accident free driving. We have lots of technical assistance systems

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which take care of customers when they make a mistake or when

:21:51.:21:54.

something happens unexpectedly. They interfere and prevent accidents.

:21:55.:22:01.

When you do that, you can keep the steering wheel and keep on driving

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anyway. That is autonomous driving. We come from the safety point of

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view, with the same systems we can prove that, go for a hundred

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kilometres in the street, autonomously. There are still some

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refinement and further increase of the safety of these systems

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necessary. Technically, we are very far. Do you think your customers

:22:27.:22:32.

wanted, more and more driving to be out of their hands and left to the

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computer. The customer will always be in control of the passenger

:22:38.:22:40.

chooses to drive the car all the time, it is fine. When he decides

:22:41.:22:46.

that in this car jam, I would rather read a newspaper until the traffic

:22:47.:22:51.

area starts moving again, he can do that. Two-day in hour production car

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for 20 kilometres, that is on offer which any customer can take up. Do

:22:58.:23:04.

you think the idea of the person macro the drivers seat reading a

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paper, not watching what is going on on the road is a good thing to

:23:07.:23:11.

aspire to? Absolutely, when she wants to. When we have achieved the

:23:12.:23:16.

level where we can do that with the least the same level of safety is

:23:17.:23:20.

when she is driving herself, that is where we are up two to 30 kilometres

:23:21.:23:27.

today. You are a company man. He joins Daimler in 1976. You then

:23:28.:23:31.

executive chairman for seven years. A much longer do you want to do

:23:32.:23:36.

this. Some people you will think you will leave very soon. I would -- I

:23:37.:23:43.

would prefer we discuss more about our beautiful cars which many

:23:44.:23:47.

customers are looking for and about personal issues. I'm perfectly fine

:23:48.:23:50.

with what I'm doing today. I do not worry. I met the first month of my

:23:51.:23:56.

new contract. I do not worry how long I will do that job. I think we

:23:57.:24:00.

are on a very good move with our company. That is the only thing that

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matters. No plans to drive into the sunset? That is certainly not my

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object to. Dieter Zetsche, we have two ends there, thank you very much.

:24:12.:24:42.

During a normal winter, the weather for the week ahead wouldn't be

:24:43.:24:47.

remarkable at all. However, although there will be wind and rain,

:24:48.:24:50.

compared to last week, it is looking an awful lot calmer. We will see low

:24:51.:24:56.

pressure systems but we won't see intense storms. For most, a drab

:24:57.:25:01.

Monday morning. Cold across northern Scotland. A little icy as the wet

:25:02.:25:06.

weather pushes in here with snow. Snow over the hills to

:25:07.:25:07.

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