Daimler AG ( DDAIF ) plans to consolidate its five main business units into three separate and independent companies, as global automakers confront massive changes to the regulatory landscape as well as emerging threats from Tesla ( TSLA ) and other Silicon Valley automotive upstarts.
[ibd-display-video id=2340977 width=50 float=left autostart=true] The reorganization would merge Mercedes-Benz Cars and Mercedes-Benz Vans into one company; combine Daimler Trucks and Daimler Buses as the second; and have an existing car-financing entity, Daimler Financial Services, operate as the third. The announcement has spurred speculation of an eventual breakup of the company.
"Whoever aims for sustainable competitiveness and profitability must continuously evolve and adapt to rapidly changing surroundings - technologically, culturally and also structurally," said Dieter Zetsche, a board chairman at Daimler AG, while another top executive said the changes will allow Daimler "to react as quickly and flexibly as possible to market developments and a fundamentally changing competitive environment."
As momentum grows for tech-laden and emission-free cars, automakers from General Motors ( GM ) and Ford Motor ( F ) in the U.S. to Daimler and Volkswagen ( VLKAY ) in Germany are expanding electrification and self-driving programs.
Daimler recently announced plans for more than 10 different all-electric vehicles within five years , including trucks and buses. Such efforts have assumed urgency as Tesla's battery innovations have transformed consumers' expectations for electric driving range, while more and more countries plan to eventually phase out cars that burn fossil fuels, including top global auto market China.
Still, Tesla suffered a setback to its plans to unveil a heavy-duty electric truck this month, while Daimler charged ahead with its unveiling of the world's first fully electric light-duty truck , set for mass production in 2019. Tesla also has been experiencing growing pains of its own and fired hundreds of workers last week as it struggles to align Model 3 supply with overwhelming demand.
U.S.-listed shares of Daimler added 0.4% to 80.67 on the stock market today , still in buy range following their breakout last month from a flat base with a 78.21 entry, but volume is minuscule.
Volkswagen also nudged fractionally higher to extend gains from a September breakout. Meanwhile, Tesla stock slid 1.4% to 350.60 Monday. Shares cleared a 370.10 buy point on Sept. 14, but then triggered a sell rule and have not recovered, GM shed 0.3%. Ford perked up 0.6% despite an analyst's warning that 2018 earnings estimates may be too high. Ferrari (RACE) added 1.6% as the stock eyes a 118.20 buy point.
IBD'S TAKE: Here is a list of stocks to watch, like GM, with Relative Strength lines making new highs .
Daimler's proposals for reorganization will require approval by shareholders and board members, and would be implemented in 2019 at the earliest. The three proposed companies would function as wholly owned subsidiaries of Daimler AG and there are no plans for spinoffs, the German car giant said.
In light of potential opposition to the plans, Daimler said it does not intend to make job cuts and will make an extra multibillion-euro contribution to the company's German pension fund.