Big automakers are breaking themselves apart to compete with Silicon Valley

Daimler AG, the parent company of Mercedes-Benz, is splitting into three companies to be "in shape for the future," the automaker announced today. Mercedes-Benz, the truck division of Daimler and the mobility division of Daimler will become independent entities as a result of the effort (which Daimler AG calls, in capital letters, "PROJECT FUTURE").

Under the reorganization, Mercedes-Benz vans and automobiles will be included in Mercedes-Benz AG. Daimler's commercial bus and truck operations will exist together as Daimler Truck AG. And the Daimler mobility operation will merge with its financial services division to form Daimler Mobility AG. The three operations will remain under Daimler AG.

By dividing these different objectives into more discrete companies, Daimler says he hopes to give everyone more "business freedom, a market "stronger" and greater customer service ", and the ability to establish" faster and more flexible partnerships "to compete better in the ever-evolving automotive industry. Daimler shareholders will still have to vote to approve the decision at the company's annual meeting in May 2019. If approved, Daimler's new appearance will not continue until January 1, 2020.

The decision of Divide Daimler is the second move of its kind made by an automaker in the last week. On Monday, Ford created a new entity called Ford Autonomous Vehicles LLC. The US automaker also announced on Wednesday that it is planning a restructuring of its global business model "to improve competitiveness." (Ford had extended its more technology-focused services such as sharing trips and sharing bicycles in a company called Ford Smart Mobility LLC.)

Automakers have pushed, and have been pushed, into all kinds of new directions in the last decade. They have been forced to adapt to the growing demand for hybrid and electric transmissions, mainly thanks to government policies, but also to the success of companies like Tesla. Almost all of them are also exploring the idea of ​​autonomous cars in some form or form, largely thanks to Google and the rest of Silicon Valley. And most are also flirting with new business models, whether car sharing, travel sharing or subscription services, again largely thanks to the avalanche of technology companies in the mobility space.

All this comes at a time when automakers are bigger than ever and operate on an unprecedented global scale. Daimler AG, for example, is apparently a German company. But it is one of the largest automotive companies that produces vehicles in China, which it does as part of an agreement with state carmaker BAIC. The company also has an agreement with Chinese search giant Baidu to develop self-driving technology. And the head of the Chinese automaker Geely, owner of Volvo, recently became the largest shareholder of Daimler. And that is only in China; Daimler has many other manufacturing efforts throughout the world.

Add the growing tensions to President Trump's sudden interest in starting trade wars, and there is simply more external pressure on the auto industry than ever before.

In recent years, car manufacturers have mainly tried to take advantage of some of these uncertainties through agreements with technology companies, while working with each other. General Motors invested in Lyft to develop autonomous driving cars, but also bought the autonomous automotive company Cruise Automation, which recently obtained $ 2.25 billion from the SoftBank risk fund. Ford raised $ 1 billion in Argo, an autonomous IA company, and its Smart Mobility LLC partnered with Chinese automaker Zotye to develop transportation services in that country. Daimler and BMW recently agreed to merge their mobility operations into a separate company. (It's not worth it that it's not clear what the news of today means for that movement.) That's just to name a few.

But the decisions made by Daimler and Ford this week indicate a willingness to react to the changes of the entire industry at a deeper level, more internal scale than we have seen before. While the stock market initially reacted negatively to both announcements (Ford in particular is currently trading at its lowest point in six years ), Daimler recovered quickly. And there are reasons to believe that these decisions could really help these automakers in the long term, according to Tasha Keeney, an analyst at ARK Invest.

"It is a smart decision to separate these companies, since they can be set up for a potential mobility IPO later on the line, and maybe a vehicle for someone else's money, like the SoftBank Cruise agreement," he says. With so much money invested in companies focused on mobility games (from transport to transporting scooters) and autonomous vehicles at the moment, dividing these potential businesses into their own companies could make the investment more attractive, since investors know exactly where the money goes.

Separating these businesses could also help attract new talent, says Keeney. "The separation could create a mechanism in which it can offer equity in the specific mobility entity to potential hires, much more attractive to offer mobility co-actions versus traditional OEM actions for young technological talents." This is clearly what Ford is trying to derive a company dedicated to autonomous vehicles and promising that it will provide an atmosphere of start or Silicon Valley when it opens in the market of recovered products. Historical train station that the automaker just bought.

Both companies insinuated that some of these ideas were at stake in the press releases announcing their decisions, and Ford even explicitly promoted that it would allow third-party investment in Ford Autonomous Vehicles LLC. But more important than that, says Keeney, these movements show that Daimler and Ford are finally serious about the possibility of autonomous vehicles becoming a major revenue generator, especially if they are allowed to sink or swim out of the structures of a car. traditional car manufacturer.

However, what could really be the core of these decisions is that all these ideas about new business models based on mobility revolve around a central concept of reduction, or at least alteration, of the ownership of the automobile. And fear, they say, is a great motivator.

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