To support a successful business carve-out, the treasury team at Daimler Truck had to understand which functions were essential from the outset and what could be refined once the new business had shifted into top gear.
With a company history stretching back more than 125 years, Daimler Truck is one of the largest manufacturers of trucks and buses in the world. It became an independent company in December 2021 following a spin-off from the Mercedes passenger car company. Today, Daimler Truck has circa 105,000 employees and 42 production sites in five continents.
Claus Baessler, Vice President Treasury & Tax, Daimler Truck, enthuses: “Last year was the best year in our company’s history, with outstanding financial results. We sold more than 526,000 trucks and buses and achieved an adjusted operating profit of €5.5bn with more than €50bn in revenues.”
These figures demonstrate how quickly the spin-off has proven to be successful. However, when the decision was made that Daimler Truck would become an independent entity, the treasury team had to act quickly to ensure that all essential processes were in place from the very outset.
“The spin-off announcement was in early February 2021, and our listing on the Frankfurt Stock Exchange was in December of that year, so we had roughly ten months between these two events,” recalls Baessler. “Honestly, this was a fast process.”
Given that timing, it was crucial to focus on setting up the necessary infrastructure for independence as fast as possible. Establishing the new company’s equity story to attract investors was vital, and achieving credit market readiness presented a further challenge. “We had a huge bridging facility in place that was arranged at Mercedes, and we were establishing an RCF [revolving credit facility],” Baessler elaborates.
To achieve these goals, attaining a solid investment-grade rating was essential.
“We got in touch with [rating agencies] S&P and Moody’s to sort out what the requirements for an investment-grade rating would be and how we would implement that,” states Baessler. “Additionally, there was a need to swiftly establish payment systems and implement ring-fencing for the IT systems, which were shared with the old company and are, to a certain extent, still shared today.”
People powered
When setting up the new treasury function in time for the go-live date, some elements presented more obstacles than others. In the treasury department, the immediate focus was on filling leadership positions.
“Personal planning was a critical task,” explains Baessler. “There were no dedicated truck and bus employees in the treasury of the parent company, unlike in the more product-related areas such as development and engineering.”
From the outset, Daimler Truck had a much smaller team, approximately one-third of the size of the Mercedes passenger car company. With a smaller team size comes flatter hierarchies and fewer complex processes. “There are also fewer committees accompanying the processes, so that makes a difference,” Baessler acknowledges.
Even though the spin-off occurred less than three years ago, treasury operations look significantly different today than they did in December 2021.
“We started with a ‘copy-and-paste’ style of organisation, which made a great deal of sense at that time due to the time pressure,” Baessler adds. “But since the beginning of this year, we have now established a new organisational structure, moving away from the previous regional set-up.”
Today, Daimler Truck’s global treasury operations are steered from the company’s Stuttgart headquarters. Treasury centres worldwide, including more execution hubs than previously, are guided by steering and decision-making from the central team. This is helping to drive greater treasury efficiencies across the board.
Passing the tech baton
While the staffing of the new treasury department went relatively smoothly, the heavy time pressure did present specific issues regarding thinking through the treasury technology set-up for the new organisation, particularly concerning the legacy systems already in place.
“The systems separation occasionally caused significant headaches,” admits Baessler. “Thankfully, our colleagues from Mercedes were a huge help with this. Because of that, we had it figured out in time.”
Next on the agenda is completing the IT handover.
“Not all the systems are completely separated from Mercedes at this point, not only in treasury but all over the company,” affirms Baessler. “We have certain shared service level agreements [SLAs] in place, the longest of which runs until the end of 2024 when we are aiming to be completely independent.”
Establishing the new treasury ecosystem and completely separating from the ‘old world’ presents Daimler Truck with an excellent opportunity to shape a system that better fits its needs.
“The previous system would have been too customised to fit the needs of a truck company,” underlines Baessler. “We have made a pitch regarding the system we want to go for. It’s a huge amount of work, but the result will be something we probably wouldn’t have achieved without a spin-off.”
Be bold, be realistic
Reflecting on the journey to build the new treasury function at Daimler Truck, Baessler has identified three topics that he believes are essential to treasury spin-off success. The first of these is to be bold when streamlining processes and structures.
“What you do not change in the first year to 18 months, you will probably never change,” he suggests. “Don’t hesitate to eliminate unnecessary processes or elements early on and simplify wherever possible to create a lean and efficient treasury, from both an organisational and process perspective.”
A second takeaway is for treasurers to prioritise strategically and focus on what is needed from the start. “Determine where 80% completion is efficient versus aiming for a 100% solution,” advises Baessler. “Setting the right priorities is crucial, as achieving a fully fledged treasury capacity on day one is unrealistic.”
Finally, this project has underlined the crucial nature of time management. “Interestingly, we felt significant time pressure, but having more time would not necessarily have led to more beneficial solutions,” Baessler concludes. “The urgency of a spin-off situation forces efficient and fast decision-making. Having too much time could see treasurers lose themselves in long discussions and, ultimately, not achieve results any better.”
