:00:00. > :00:11.mistreated. That's it from me for this hour. For
:00:12. > :00:17.now it is time for HARDtalk. Welcome to HARDtalk, I'm Stephen
:00:18. > :00:23.Sackur. Today I am in Stuttgart, Germany, a city with a long history
:00:24. > :00:27.of engineering and manufacturing. The auto industry is a major player
:00:28. > :00:34.here, and you can see signs of it all over town. Which is good news
:00:35. > :00:42.for Stuttgart, as long as the German car industry continues to thrive. My
:00:43. > :00:48.guest today is Dieter Zetsche, the boss of Daimler AG, the makers of
:00:49. > :00:52.Mercedes-Benz cars. The company, of course, with a global reputation.
:00:53. > :00:57.But over the past decade they have made some costly mistake. They still
:00:58. > :01:04.face some major challenges, not least the push for greener, more
:01:05. > :01:11.efficient vehicles. Yes, Daimler AG have a proud reputation. At with a
:01:12. > :01:26.have a bright future? -- but does it have.
:01:27. > :01:34.Dieter Zetsche, welcome to HARDtalk. Innkeeper having me. Peewee stick in
:01:35. > :01:40.the headquarters of Daimler AG. Strikes me that this isn't the right
:01:41. > :01:46.place to be if you have global ambition. -- here we sit. Yes and
:01:47. > :01:50.no. On the one hand, of course we are a global company and we want to
:01:51. > :01:56.be present around the globe. On the other hand, our strength is our
:01:57. > :02:00.brand. And one important character of our brand is being German. White
:02:01. > :02:06.but let's be honest about where Europe is today, car sales have
:02:07. > :02:10.slumped in the last six years. They have come down massively across
:02:11. > :02:17.Europe. Still in Germany and France they went down last year. If you are
:02:18. > :02:21.ambitious about global growth. Europe is the last place you want to
:02:22. > :02:24.put your focus. It is true what you are saying that at the same time we
:02:25. > :02:29.are selling more cars in Europe today than we did six years ago and
:02:30. > :02:36.we are still selling more cars in Europe than between US and China
:02:37. > :02:41.combined. So... I'm talking about growth potential. Absolutely already
:02:42. > :02:48.from eight demographics point of view. Growth will come from emerging
:02:49. > :02:54.markets. From the US as well. Still, the volume we sell here is so
:02:55. > :02:58.significant that it is important to deal with that. But no business
:02:59. > :03:02.leader rest on his laurels and always looks to tomorrow. A simple
:03:03. > :03:09.question, you know how old the average buyer of a new car in
:03:10. > :03:20.Germany is today? It is close to 50 years. 52.2 years. That's a disaster
:03:21. > :03:27.to you. No. First of all, customers of that age a more affluent.
:03:28. > :03:30.Everybody should be jealous about us having a very strong foothold in
:03:31. > :03:35.that part of the population. At the same time, when you want to grow you
:03:36. > :03:41.have to look for younger customers. New car sales in general are being
:03:42. > :03:47.realised not by the youngest who either have no car or a used car,
:03:48. > :03:50.but clearly, when you want to be there in 20 and 30 years, you have
:03:51. > :03:56.to win the young customers today, which is what we do with our new
:03:57. > :04:01.product. What you are when you talk about people relying on used cars,
:04:02. > :04:04.your company is indeed moving into the car share business as well, it
:04:05. > :04:08.seems to me you are acknowledging that in the more developed
:04:09. > :04:16.economies, the assumptions about everybody owning a car, using a
:04:17. > :04:21.car, they are a thing of the past. That is true again. So why would
:04:22. > :04:30.they want to invest in your company when it seemed like you are a
:04:31. > :04:33.Somerset industries? Yum I've been in this princess for 40 years and I
:04:34. > :04:39.can't remember a time when growth prospects were so positive. That is
:04:40. > :04:44.not because of growth potential in Europe, but because of the emerging
:04:45. > :04:51.markets where more people get to a level of wealth where they can
:04:52. > :04:53.afford to buy a car and they are as excited about the first car as
:04:54. > :04:59.Europeans were in the 1950s and 1960s. That is a huge amount of
:05:00. > :05:05.potential. That is where we are benefiting. It is interesting that
:05:06. > :05:10.you are agreeing with my first proposition that it's not here that
:05:11. > :05:14.your focus has to be. But I do want to stick with thoughts on Europe for
:05:15. > :05:19.a moment longer because you are one of the longest serving and
:05:20. > :05:22.best-known corporate leaders in Europe's today. I want your
:05:23. > :05:30.perspective on what is happening on this continent. It seems to me that
:05:31. > :05:34.Europe has a profound set of structural economic issues, many of
:05:35. > :05:40.them not necessarily in Germany but in surrounding countries, when you
:05:41. > :05:46.look as an industrialist and an investor, what do you think the
:05:47. > :05:56.biggest problem is? We have to overcome our fiscal problems. It is
:05:57. > :06:01.difficult to have good fiscal situation and at the same time see
:06:02. > :06:04.the economy being in a slump and see the need for some incentives for
:06:05. > :06:12.growth in the industry or economy altogether. We have come through the
:06:13. > :06:19.worst. Most countries have made some progress in Europe in this regard.
:06:20. > :06:25.We can now afford to start incentivising. Better by a reduction
:06:26. > :06:30.of our state's restriction rather than just by deficit spending. Do
:06:31. > :06:37.you think the state plays far too intrusive a role in Europe? It is
:06:38. > :06:43.always a pendulum. We had a time in Europe where many people thought
:06:44. > :06:50.very liberally and wanted less government unless state. There were
:06:51. > :06:58.some extreme consequences like the financial crisis. -- and less state.
:06:59. > :07:04.Many people do believe again the government must intervene in
:07:05. > :07:13.Moorfields which definitely is not a right recipe to follow. That Mac
:07:14. > :07:18.more fields. Why is so much of Europe failing to get anywhere close
:07:19. > :07:22.to Germany in terms of competitiveness and economic
:07:23. > :07:35.success? Competition is what drives success. I think in Germany, in most
:07:36. > :07:40.parts of the time, the Government held back in interfering in
:07:41. > :07:47.business. It let competition work. In some other nations there was more
:07:48. > :07:54.protectionism and more interference by the Government and the result is
:07:55. > :07:57.austerity. When you look at your work is in your French plants or
:07:58. > :08:08.your Hungarian plants, do you think they are lazy ? Certainly not. In
:08:09. > :08:11.hungry we had a similar quality level for comparable cars as we do
:08:12. > :08:20.in our plant in Germany. What about France? In France we have a
:08:21. > :08:25.different model. We only have a few hours on the car being done and then
:08:26. > :08:31.we have supplied is positioned around. I would not agree with the
:08:32. > :08:36.American tyre manufacturer send a letter complaining about French
:08:37. > :08:39.workers. I don't think it is about the people but about the system and
:08:40. > :08:45.some of the direction the system has taken four years which I disagree
:08:46. > :08:49.with. I think more fresh wind and competition helps you in the long
:08:50. > :08:54.run but it might be difficult in the short term. It is like practising in
:08:55. > :08:57.your basement every day, that is what we need in our companies and
:08:58. > :09:02.that is what we have been faced with in Germany for many years. Reading
:09:03. > :09:06.between the lines, you are saying that French political leaders have
:09:07. > :09:09.got things wrong in their economic management over the years. I wonder
:09:10. > :09:14.whether you would acknowledge that you have got things wrong over the
:09:15. > :09:19.last decade in Daimler AG, particularly thinking of the
:09:20. > :09:29.billions and billions of euros or dollars that you poured into the
:09:30. > :09:38.tie-up with Chrysler which turned out to be a disaster. It is easy to
:09:39. > :09:41.come up with this situation. I made the decision to separate the company
:09:42. > :09:46.'s. But you were instrumental in the tie up in the first place. I don't
:09:47. > :09:54.want to hide that. I just said, in hindsight, it was obvious it did not
:09:55. > :10:00.create value. At that time, there was a board I was a member of, not
:10:01. > :10:05.leading but a member, which decided to join forces with the company
:10:06. > :10:12.which was at that time strong. When I went over there, we got a
:10:13. > :10:17.significant revival, with setbacks, but when I saw there were no
:10:18. > :10:21.firewalls at Daimler or Chrysler, against any risk, I saw the upside
:10:22. > :10:33.potential and downside risk, there was only one decision for me. That
:10:34. > :10:41.was to split immediately. What did it cost? Some people said $30
:10:42. > :10:45.billion. The merger created a delusion for the Daimler
:10:46. > :10:52.shareholders so that a higher number of shareholders were left after
:10:53. > :10:56.selling off Chrysler. 30 billion the loss less yellow haven't made a
:10:57. > :11:03.calculation but it was substantial. That was substantial. I'm getting,
:11:04. > :11:07.in a way that is history, but I am getting to the other element of the
:11:08. > :11:12.German economic model. It seems to me that many countries, having
:11:13. > :11:16.overseen such a terrible corporate failure, they would have been a
:11:17. > :11:21.desire to sweep away a whole generation of top management, and of
:11:22. > :11:26.course you were by then the top manager, at the apex of the company
:11:27. > :11:30.'s. Why do you think you managed to hang on to your job and that there
:11:31. > :11:35.wasn't this sweeping out of the entire generation of leaders? I'm
:11:36. > :11:41.not someone who is defensive and tries to defend the past. I am
:11:42. > :11:48.responsible for this company for eight years. When I took over, we
:11:49. > :11:55.had significant challenges within the company. The liability for
:11:56. > :11:58.Chrysler was one of them. We had quality problems. Our product
:11:59. > :12:04.portfolio was poor. We had design criticism. Many things. Together
:12:05. > :12:11.with my colleagues I addressed these issues and today we are a company
:12:12. > :12:19.which is very strong and has high equity as dart equity and a product
:12:20. > :12:23.range. We can follow up with production capacity and we had a 52%
:12:24. > :12:28.increase in stock price last year which was not too bad. All of that
:12:29. > :12:32.is true, but you are still lagging behind. If you look over a decade,
:12:33. > :12:40.you are lagging behind your premium market competitors at BMW and Audi,
:12:41. > :12:47.VW as well. I wonder, you now say you are determined to make Daimler
:12:48. > :12:50.Mercedes-Benz number one x 2020. I am wondering how that can be
:12:51. > :13:00.realistic given you where you are now. We were the fastest growing
:13:01. > :13:03.manufacturer last year. We had two decades were we had different
:13:04. > :13:09.directions between a technology company for ten years and another
:13:10. > :13:14.company for ten years. I refocus the company on automotive and... The
:13:15. > :13:18.idea you were a broad technology company and the idea that you would
:13:19. > :13:22.diversify and use Chrysler and become in that sense a global
:13:23. > :13:29.conglomerate, you have had to junk both of those core strategy. We can
:13:30. > :13:35.study that merger and see what conclusion we can take. That is
:13:36. > :13:42.fine. But looking at today, we are moving fast. We are selling more
:13:43. > :13:49.cars than BMW or Audi outside of China. I was going to say, what
:13:50. > :13:53.about China? At the beginning of the conversation you may recall it was
:13:54. > :13:58.about the degree to which you have to be focused, like a laser beam, on
:13:59. > :14:03.your biggest growth potential market and China is number one. In China,
:14:04. > :14:09.this is your words, the biggest element of our profitability gap
:14:10. > :14:14.remains China. We are in poor condition in comparison to Halep
:14:15. > :14:27.peer 's. They are your words. -- to our peers. We came 20 years later to
:14:28. > :14:34.China than Audi did. We were four years behind BMW. We were catching
:14:35. > :14:39.up, matching BMW. Three years ago, we got into a slump. The others were
:14:40. > :14:46.growing and we did not. The analysed the reasons and addressed them. We
:14:47. > :14:50.had 45% growth in January. We addressed the issues. We fixed them.
:14:51. > :14:55.I am convinced of that. That is about product. The product is now
:14:56. > :15:00.received in China very well. With the C class come and we will start
:15:01. > :15:05.to catch up and get closer to our competitors as well. There is one
:15:06. > :15:12.important question Chinese consumers are asking of companies like yours,
:15:13. > :15:16.from the websites. They say we pay 150% more for the same car that can
:15:17. > :15:22.be bought in the United States or Europe? Why such an incredible
:15:23. > :15:31.markup? On the cars you sell in China? Nobody of us is making 100%
:15:32. > :15:37.profit. We are talking about different cost structure. A good
:15:38. > :15:43.portion of that being addressed all created for instance bike customs
:15:44. > :15:47.when we talk about importing cars. That is not all about it. An
:15:48. > :15:52.electric car company cares for his issued a fair price challenge in
:15:53. > :15:58.China. They say they can sell their product at 50% more than Europe,
:15:59. > :16:04.taking apart transport and Customs costs. Looking at companies doing
:16:05. > :16:09.business in China, it is profitable for us but not profitable at the
:16:10. > :16:16.percentage you are mentioning. We are talking about the low two digit
:16:17. > :16:22.margins. Again, this is about the order of rural cost structure we are
:16:23. > :16:26.facing. We have two face on productivity gains in China all the
:16:27. > :16:31.time as well which we are doing. Today we are implying more people in
:16:32. > :16:34.China, more cars are produced in Europe and the US and we have to
:16:35. > :16:41.work on this issue. Let's shift focus and talk about and by mental
:16:42. > :16:48.challenges. We are at an impressive Mercedes showroom, bigger cars all
:16:49. > :16:53.around us. Many of which are not the most fuel-efficient in the world.
:16:54. > :17:00.Germany just last year, went to the European Union and demanded a delay
:17:01. > :17:06.in the imposition of emissions Carbon targets for new cars. Targets
:17:07. > :17:10.were supposed to be in place for 2020 after pressure from Germany,
:17:11. > :17:15.that was put back to 2024. Your company was named as one of the key
:17:16. > :17:21.lobbyists behind the German move. Why did you do it? We are offering
:17:22. > :17:25.the most fuel-efficient vehicles in every segment on a global basis.
:17:26. > :17:32.With the German industry and Mercedes as well. We are offering an
:17:33. > :17:36.S class with a plug in hybrid with less than 70 grams per hundred
:17:37. > :17:43.kilometres. My point to you is, to reach these targets, was 95 grams
:17:44. > :17:46.per kilometre, he wanted to be introduced by 2020, you would have
:17:47. > :17:51.to accept, these big cars and not the future. Let the answer to your
:17:52. > :17:58.question. The fact is, the discussion was not of the 95 grams
:17:59. > :18:06.carrier but it was about very minor issues to which electric cars would
:18:07. > :18:11.have a multiple of 1.5 or two being counted as part of this average. One
:18:12. > :18:17.environmental campaigner in Brussels said the resulting fudge was the
:18:18. > :18:26.result of naked power politics played by Germany? And backed by you
:18:27. > :18:33.and BMW and the big carmakers in? Festival, we'll let interest and a
:18:34. > :18:38.very valid interest to reduce the tier two emission vehicles as fast
:18:39. > :18:45.as technically and economically possible. We are making tremendous
:18:46. > :18:52.progress in this regard. No one has a higher percentages of reduction in
:18:53. > :18:54.the last ten years than Daimler. Secondly we are talking about
:18:55. > :19:04.differences which are almost marginal between the manufacturer
:19:05. > :19:10.who sells mostly for the size or a manufacturer like Portia Boros sell
:19:11. > :19:15.more vehicles at the high side. We are investing so much in technology
:19:16. > :19:19.that the resulting difference, in spite of the physics, it is a bigger
:19:20. > :19:25.machine in the first place with additional technology, we are
:19:26. > :19:30.reducing this gap to almost a minimum. Talking about five or ten
:19:31. > :19:33.grams difference. That is only politic to highlight that and has
:19:34. > :19:38.nothing to do with the real CO2 emission which results. I tell you
:19:39. > :19:43.what is also about politics, your decision to hire a junior minister
:19:44. > :19:49.who worked in Chancellor Merkel's office. He is now your chief
:19:50. > :19:57.lobbyist. Germans are very worried about this. They see a dangerous
:19:58. > :20:05.revolving door developing where conflict of interest appears to be
:20:06. > :20:10.very real? There is a real problem in Germany that we have not enough
:20:11. > :20:13.exchange between politics and industry as we have two higher
:20:14. > :20:19.extent of macro other countries. Very very few politicians have had
:20:20. > :20:24.time in industry. It would be much better for future understanding. In
:20:25. > :20:29.abstract I can understand that, practically what do you expect from
:20:30. > :20:34.home. Why have you-? He has such a close relationship with Angela
:20:35. > :20:40.Merkel? I do not need him to talk to Angela Merkel. I can take the call
:20:41. > :20:44.and she will answer in reasonable timeframe. Of course, when we have
:20:45. > :20:50.somebody who deals with our relationship to governments around
:20:51. > :20:53.the globe, and Germany made the point that is not important to us
:20:54. > :20:57.any more. Politics in other countries of the world are at least
:20:58. > :21:02.as important. We need somebody who has understanding of our politics
:21:03. > :21:06.and ideally has been a politician for some time himself will stop that
:21:07. > :21:12.is why he is the perfect choice for us. Not because he would have
:21:13. > :21:15.influence on anything. He knows his business and therefore can act on
:21:16. > :21:20.our behalf. We are almost out of time, you have spoken in visionary
:21:21. > :21:27.terms about a couple of ways in which you see industry develop. One
:21:28. > :21:30.is in terms of self drive, autonomous vehicles that do the
:21:31. > :21:34.driving for themselves the driver can sit that can play on his laptop
:21:35. > :21:42.or whatever else he wants to do. How realistic is that? What kind of
:21:43. > :21:45.timeframe are you talking about? We are pursuing emissions free driving
:21:46. > :21:50.and accident free driving. We have lots of technical assistance systems
:21:51. > :21:54.which take care of customers when they make a mistake or when
:21:55. > :22:01.something happens unexpectedly. They interfere and prevent accidents.
:22:02. > :22:05.When you do that, you can keep the steering wheel and keep on driving
:22:06. > :22:12.anyway. That is autonomous driving. We come from the safety point of
:22:13. > :22:16.view, with the same systems we can prove that, go for a hundred
:22:17. > :22:21.kilometres in the street, autonomously. There are still some
:22:22. > :22:26.refinement and further increase of the safety of these systems
:22:27. > :22:32.necessary. Technically, we are very far. Do you think your customers
:22:33. > :22:37.wanted, more and more driving to be out of their hands and left to the
:22:38. > :22:40.computer. The customer will always be in control of the passenger
:22:41. > :22:46.chooses to drive the car all the time, it is fine. When he decides
:22:47. > :22:51.that in this car jam, I would rather read a newspaper until the traffic
:22:52. > :22:57.area starts moving again, he can do that. Two-day in hour production car
:22:58. > :23:04.for 20 kilometres, that is on offer which any customer can take up. Do
:23:05. > :23:06.you think the idea of the person macro the drivers seat reading a
:23:07. > :23:11.paper, not watching what is going on on the road is a good thing to
:23:12. > :23:16.aspire to? Absolutely, when she wants to. When we have achieved the
:23:17. > :23:20.level where we can do that with the least the same level of safety is
:23:21. > :23:27.when she is driving herself, that is where we are up two to 30 kilometres
:23:28. > :23:31.today. You are a company man. He joins Daimler in 1976. You then
:23:32. > :23:36.executive chairman for seven years. A much longer do you want to do
:23:37. > :23:43.this. Some people you will think you will leave very soon. I would -- I
:23:44. > :23:47.would prefer we discuss more about our beautiful cars which many
:23:48. > :23:50.customers are looking for and about personal issues. I'm perfectly fine
:23:51. > :23:56.with what I'm doing today. I do not worry. I met the first month of my
:23:57. > :24:00.new contract. I do not worry how long I will do that job. I think we
:24:01. > :24:05.are on a very good move with our company. That is the only thing that
:24:06. > :24:11.matters. No plans to drive into the sunset? That is certainly not my
:24:12. > :24:42.object to. Dieter Zetsche, we have two ends there, thank you very much.
:24:43. > :24:47.During a normal winter, the weather for the week ahead wouldn't be
:24:48. > :24:50.remarkable at all. However, although there will be wind and rain,
:24:51. > :24:56.compared to last week, it is looking an awful lot calmer. We will see low
:24:57. > :25:01.pressure systems but we won't see intense storms. For most, a drab
:25:02. > :25:06.Monday morning. Cold across northern Scotland. A little icy as the wet
:25:07. > :25:07.weather pushes in here with snow. Snow over the hills to