Evolution of an International Group

The story of Daimler-Benz AG

Daimler-Benz AG is today a group active worldwide. Its main line of business is automotive manufacturing, to which other high-technology fields of activity have been added in the course of the concerted expansion of recent years. The invention by Gottlieb Daimler and Karl Benz of the motor car in 1886 launched a tradition in automotive manufacture which now dates back more than 100 years. The core businesses of the Daimler-Benz group today include automobile manufacture construction, rail systems, aerospace, propulsion systems, defence technology, automation and information technology services.

1883 - 1926: the foundations are laid

The history of the Daimler-Benz group began in October 1883, when Karl Benz, Max Rose and Friedrich Wilhelm Esslinger founded Benz & Co. (which became Benz & Cie. in 1899) Rheinische Gasmotorenfabrik OHG in Mannheim. The first motor cars took to the road in 1886: the Benz patent motor car made its first public trip through the streets of Mannheim in July of that year and around the same time, although the two inventors were working quite separately, Gottlieb Daimler carried out trials with his first motor carriage. In 1890, Daimler founded the Daimler-Motoren-Gesellschaft (DMG) in Bad Cannstatt, near Stuttgart. America's first fully functional vehicle engine, built in Hartford, Connecticut, was designed on the basis of plans produced by Daimler.

In Mannheim meanwhile, further advances were taking place at Benz's company. In 1893, the "Benz Velo", the world's first standard production automobile, appeared on the market and in 1894 the first bus was developed. The first truck however was built by DMG in 1896 and exported to the United Kingdom.

In 1902 DMG took over the vehicle and engine-making factory Motorfahrzeug- und Motorenfabrik Berlin AG in Berlin-Marienfelde, in what was a sizeable merger for the times. In 1903, a large new production plant was built in Untertürkheim near Stuttgart, to which DMG's registered office was transferred from Bad Cannstatt. During the prosperous Imperial era, Benz & Cie. also expanded. In 1907 it acquired the Süddeutsche Automobilfabrik Gaggenau GmbH and later also branched out into aero-engine manufacture, winning the Imperial Prize for the best German aero-engine in 1913. The next year, with the outbreak of the First World War, both Benz and DMG had to go over to war production.

After the war, both companies were affected by the world economic crisis; it became necessary to diversify and in addition to motor vehicles, typewriters were produced in Untertürkheim and bicycles in Marienfelde. The troubled economic climate and the large number of vehicle manufacturers contending for a share of the market forced companies to form alliances. In 1924 the Daimler and Benz companies formed an association of common interest, marketing their cars under the tradename Mercedes-Benz. Two years later, in June 1926, the companies set the seal on this alliance when they merged to form Daimler-Benz Aktiengesellschaft. The company's registered office was in Berlin and the administrative headquarters were based in Untertürkheim.

1927 - 1945: boom followed by disaster

The presentation of a 5 tonne diesel truck in 1927 paved the way for standard production of diesel-engined trucks. As a result of the world economic crisis of 1930 - 1932, at times as much as a quarter of the annual production of Daimler-Benz had to be stockpiled and production and sales plummeted to new lows, while the workforce fell by more than half from its 1927 level. From 1933 onwards, however, Daimler-Benz began to profit from the upsurge in armament production under the Nazis and the state-sponsored boom in the vehicle industry.

Demand from abroad also began to pick up. In 1936, large consignments of trucks were delivered to China and a contract was signed for an assembly plant to be set up near Shanghai. A year-on-year increase in exports of 43 % was registered in that year. In 1934, after the years of recession, Daimler-Benz had returned to Grand Prix racing. The success of the legendary Silver Arrows is one of the high points in the racing chronicles of Daimler-Benz.

With the outbreak of war in 1939, the company had to go over to producing armaments. Car and commercial vehicle output was cut back, while production of large industrial engines, aero-engines and marine engines was stepped up. Aerial bombardment of the Daimler-Benz plants in the following years led to the destruction of up to two thirds of the buildings and facilities in Sindelfingen, Untertürkheim and Berlin by 1945.

1945 - 1984: from a fresh start to new strength

Only a few months after the end of the war, vehicle production began again, initially to supply the allied forces. In 1946, car production was resumed at the Sindelfingen plant with output of the pre-war 170 V totalling 214 units during that year. By February 1949, production had risen to 1,000 cars per month. Export business got going again in 1949: the first major export order was from Brazil, to supply 1,000 knocked down truck chassis. In 1950, exports soared from DM 6 million to DM 66 million. At the same time, Daimler-Benz AG extended its manufacturing activities to the South American continent, setting up its first foreign production company in Argentina. This was followed three years later by the founding of Mercedes-Benz do Brasil, likewise a commercial vehicle manufacturing plant and soon afterwards, in 1955, of Daimler-Benz of North America Inc., based in Delaware.

Back in Germany, Daimler-Benz acquired its first major interest in another company in 1958, when it took a majority stake in Auto Union GmbH, of Ingolstadt. In 1960 Daimler-Benz also acquired a majority stake in Maybach-Motorenbau GmbH in Friedrichshafen. This marked the start of the company's engine manufacturing activities on Lake Constance and was followed by the formation of Mercedes-Benz Motorenbau GmbH in 1963. In late 1964, Daimler-Benz parted company with Auto Union, which was taken over by Volkswagen. In 1966, the two plants in Friedrichshafen were merged into Maybach Mercedes-Benz Motorwerke GmbH.

The commercial vehicle operations of Daimler-Benz took a major step forward in early 1969 when, following negotiations with Rheinstahl AG, Daimler-Benz took over the Hanomag plants in Bremen and Hamburg-Harburg and the Henschel plant in Kassel. By the end of 1977, these plants and their sales organisations had been fully integrated into Daimler-Benz and Hanomag-Henschel vehicles from then on carried the Mercedes star. An important foreign investment, the Tabriz engine factory in Iran, founded in 1970, soon became a springboard for sales of commercial vehicles to countries in the Middle and Far East. 1970 also saw the founding of MTU Motoren- und Turbinen-Union, comprising MAN's Allach plant and Daimler-Benz's Friedrichshafen complex. Initially, MAN and Daimler-Benz each held a 50 per cent share.

In 1973, an agreement was signed which marked the start of scientific collaboration with the Soviet Union and an exhibition was staged by Mercedes-Benz in Moscow which drew a large audience. 1973 was also the year in which the company's foreign business for the first time exceeded sales in Germany. Production of the new estate car, the T-model, began in 1978 in Bremen. The company also set about establishing its presence in the American commercial vehicle market, acquiring Euclid Inc. of Cleveland, Ohio. Euclid manufactures ultra-heavy-duty commercial vehicles, for example for the open-cast mining industry. This interest was sold in 1984 due to severe changes in market conditions.

Around this time the face of the Daimler-Benz model range began to change. Preparations were underway for production of a third car series, which led to some changes in the role of the various plants in the Daimler-Benz production structure, for example production of the light van was moved from Bremen to Düsseldorf. Also, in 1979, Daimler-Benz and Steyr-Daimler-Puch founded a joint venture, Geländefahrzeug GmbH in Graz, Austria, to produce the G-wagon. 1980 and 1981 saw heavy investment in the United States. In Hampton/Newport, a truck plant was set up with capacity for assembling 6,000 trucks annually from CKD sets supplied from Brazil. In Portland, Oregon, Freightliner Corporation was acquired, a leading American manufacturer of heavy-duty trucks.

The new compact series (Mercedes 190) was presented to the public in 1982 and was successful on the market right from the start.

1985 to today: emergence of the high-technology concern

In 1985, the Board of Management and the Supervisory Board decided to make substantial investments in a number of German companies. The Daimler-Benz group thereby began to pursue a new course and, even more important, to establish a new and forward-looking corporate structure.

The purchase in March 1985 of MAN's shares in MTU Motoren- und Turbinen-Union GmbH - by now a widely acclaimed manufacturer of turbines, aero-engines and high-speed diesel engines - was followed in June of the same year by the acquisition of a majority stake in Dornier GmbH of Friedrichshafen, a company with a long tradition in the aerospace sector. Pending the approval of the Federal Cartel Office for a larger holding, Daimler-Benz then acquired an initial twenty-five per cent stake in AEG Aktiengesellschaft in October 1985. AEG's fields of activity included energy systems, industrial and rail systems, communication systems and domestic appliances.

In 1985, the Daimler-Benz group registered substantial year-on-year growth, both from ongoing business and as a result of the acquisitions mentioned. The workforce increased to 231,000 (+16 %), sales to DM 52.4 billion and net income to some DM 1.7 billion (+ 52 %).

In February 1986, after the Cartel Office had given the go-ahead, Daimler-Benz increased its holding in AEG to 56 per cent and AEG was from now on included in the consolidated financial statements of the Daimler-Benz group. As a result, the total workforce of the group rose by 33 %, while sales increased by 20 %.

The management structure of Daimler-Benz was now adapted to take account of the expansion of the group. The Board of Management, with its five divisions passenger cars, commercial vehicles, AEG, MTU and Dornier, became responsible for the overall management of the group. In 1986, a wide range of activities were organised to mark the "Centenary of the Automobile". In 1987, the decision was taken to merge various fields of research into a single Daimler-Benz Research Centre to be built in Ulm, southern Germany.

With the consent of the shareholders at the Annual General Meeting, 1989 saw the start of a restructuring of the group into an integrated high-technology concern. Daimler-Benz AG is now an executive holding company, whose task is to ensure the optimal use of the group's resources. Vehicle business was transferred to the newly formed Mercedes-Benz AG, while aerospace activities were grouped together in Deutsche Aerospace AG (Dasa), which consisted initially of Dornier, MTU and Telefunken Systemtechnik (TST), later followed by Messerschmitt-Bölkow-Blohm GmbH (MBB), with more than 24,000 employees. Deutsche Aerospace took a majority stake in this company as soon as consent was granted by the Federal Economics Minister at the end of 1989. The businesses of AEG continued to be carried on within an unchanged corporate structure. Finally, also in 1989, it was decided to create a fourth corporate unit, Daimler-Benz InterServices (debis) AG. This new company offers customers both inside and outside the company a range of services including software products, computer communication services, financial services, insurance brokerage and marketing services. The four group subsidiaries each have their own individual logos, reflecting the fact that they are now independent companies accountable for their own results. Only the vehicle products, built by Mercedes-Benz AG, bear the three-pointed star.

In 1990, the year of German reunification, the top-level management of Daimler-Benz and Japan's Mitsubishi concern began discussions aimed at long-term strategic collaboration. In early summer 1990, negotiations were concluded with the Berlin Senate regarding the purchase of a site on the Postdamer Platz. In the same year, on July 1, 1990, the new group headquarters was officially opened in Stuttgart-Möhringen. An Agreement was also reached with the Automobilwerk Ludwigsfelde GmbH (IFA) in Brandenburg on co-operation in the assembly of trucks and vans.

The launch of the new Mercedes-Benz S-class in early 1991 set new standards in vehicle manufacturing, although the response in Germany was divided. At AEG, strategic expansion continued. Amongst other things this led to the acquisition of the trackbound vehicle manufacturing activities of Lokomotivbau-Elektrotechnische Werke Hennigsdorf GmbH and to the decision that the office and communication systems activities carried out by AEG Olympia should be discontinued. The French company Aerospatiale and Dasa formed the new joint venture Eurocopter S.A., to which they transferred their helicopter activities. In the same year, debis acquired a 34 % share in Sogeti S.A., the parent company of Cap Gemini Sogeti, Europe's largest software company.

As of 1992, the disappointing world economic trends and the end of the reunification-led boom prompted wide-ranging restructuring and cost-cutting measures in all areas of the Daimler-Benz group. At Dasa, the ordinary business activities of MBB and Telefunken Systemtechnik (TST) were now merged with the core company, while microelectronics activities were transferred to TEMIC, a newly founded joint venture between AEG and Dasa.

In 1993, negotiations with aircraft manufacturers Fokker resulted in the acquisition of a majority stake of 51.4 % in this company, making Deutsche Aerospace world market leader in the field of regional aircraft. With the introduction of the new C-class, Mercedes-Benz held its ground well in the market in 1993 despite the severe world recession. A highlight of the year came on October 5, 1993, with the listing of the Daimler-Benz share on the New York Stock Exchange. The group thereby became the first (and so far the only) German company to obtain direct access to the world's largest capital market.

In early 1994, there were definite signs of improvement in the world economy. Due to wide-ranging cost-cutting and performance improvement measures, there are now bright prospects for sales and earnings throughout the Daimler-Benz group as it continues to evolve into an integrated high-technology concern.