Martin Daum rebrands Daimler Trucks North America.
It had the look and feel of a celebrity gala. On a gorgeous spring morning in April, Martin Daum, president and CEO of Daimler Trucks North America (DTNA), stood in front of about 150 snazzily dressed business and political leaders who had gathered for the grand opening of the company’s gleaming, $150 million LEED Platinum headquarters. The building features a green wall, open office design and waterfront landscaping that wouldn’t be out of place in a beachfront hotel — think outdoor furniture, manicured lawns and stunning views of the river and Forest Park.
“We want the best team, and the best team should have the best house,” Daum told his guests, including Patrick Quinton, executive director of the Portland Development Commission, and Bill Wyatt, executive director of the Port of Portland. “Daimler is a growing company, and we want to move forward.”
The company plans to dedicate a time capsule outside the new building with a letter Daum wrote forecasting Daimler’s future, he said. “People will figure out the CEO was either a visionary or an idiot,” Daum said, laughing. He then relayed a lesson in fortune telling. “‘Keep the letter vague. You say: ‘One day this will happen.’ And if it comes true, you can say: ‘I told you so.’”
For many of his friends and colleagues, the speech was vintage Daum: confident, ambitious and funny, in a self-deprecating sort of way. “Martin is a leader who knows where to take the company, but he also connects very deeply with employees,” says Derek Rotz, DTNA’s director of advanced engineering. “He’s charismatic and witty.”
The blend of humility and hubris helps define DTNA, an iconic Portland manufacturer (formerly the Freightliner corporation) that now allies itself with the global, high-tech innovations of German parent company Daimler AG.
As Daum will tell you, Daimler invented both the automobile (1879) and the truck (1896, courtesy Gottlieb Daimler). Today, Daimler AG’s decidedly 21st-century subsidiaries include the car-sharing enterprise, Car2Go and, most recently, Moovel North America, an “urban mobility services” company formed this spring and headquartered in Portland.
DTNA’s new headquarters is only one example of the company’s think-globally, act-locally philosophy. Other signs include an $18 million research test track that broke ground in Madras this spring, the test-driving of an autonomous truck in Nevada last year and a rash of new employee amenities and community outreach initiatives.
Best known for its Freightliner brand of big rigs (it also has heavy duty truck, bus and fuel divisions), DTNA boasts a 40% market share and last year sold around 40,000 vehicles. Daimler AG grew revenue by 15% to €149.5 billion in 2015. The parent company does not separate out revenues by division.
But there are chinks in the armor. DTNA, which employs 20,000 nationwide and in Mexico, is laying off around 1,500 employees in its North Carolina factories this year due to slackening customer demand. (About 2,800 employees work in Portland.)
Trucks track the economy very closely, says Noël Perry, a freight transportation analyst with FTR, a Bloomington, Indiana-based forecasting firm. “The U.S. is in the seventh year of the recovery, and the likelihood of recession over the next few years is very high,” he says. And while technology and fuel efficiency are making trucks profoundly more sophisticated, the downside, says Perry, “is you require half as many trucks.”
Add to that looming competition — from Google’s new autonomous truck spinoff, among others. “All this,” says Perry, “opens up a challenging new world” for Daimler.
Fit for the masses: Daimler Trucks North America’s waterfront trail on Swan Island is open to the public.
A 30-year Daimler veteran who took over as CEO of the North American division in 2009, at the height of the recession, Daum is no stranger to tough environments.
“The mentality at the time was: ‘Let’s cut R&D,’” he says. “I did just the opposite; I accelerated it.” The company spent $250 million on R&D during the recession and is on track this year to invest $550 million. “There’s always a temptation in a crisis that I can save on the bottom line by sacrificing the future,” says Daum. “But the easy things have been invented. Now we have to go for the tough things. Investment in R&D is absolutely necessary to become a successful company.”
One week before the grand opening Daum is in his office looking out at the new waterfront greenway he opened to the public as part of the new headquarters. “I had fights with our security department,” he says. “But I don’t fear people walking along the river.” His long-term vision is to see a community trail from Swan Island to downtown. Daum shakes his head, incredulous at the (American) preoccupation with surveillance: “National security was at stake!”
Dressed in a gray suit and sporting black-frame glasses, Daum, 56 and a native of Karlsruhe, Germany, looks every inch the company man. But he doesn’t lack for character, manifest in an animated speaking style, a goofy if clever sense of humor and a straightforward confidence that is more disarming than arrogant.
Daum is “the least German German leader I know,” says Kelley Platt, president of DTNA’s Western Star brand, which makes its heavy duty trucks on Swan Island and in North Carolina. Platt, who has worked for Daimler since 1989 and was recently appointed chief diversity officer, says Daum “values good planning and is very much a future thinker. But he also truly embraces difference and is very much involved in Portland.”
Daum himself has a spiel — one of many — about his leadership style and the company’s corporate values.
DTNA’s Rose City heritage dates back to the 1930s, when Portlander Leland James founded Consolidated Freightways Lines, which eventually rebranded as Freightliner. (Daimler acquired the company in 1981.) Along with that heritage, DTNA’s Portland character shows up in the company’s willingness to take risks, Daum says. “But I can’t neglect my inheritance: discipline, stamina. That is the part of Daimler that is German.”
That inheritance goes back 130 years, when Daimler built its first garage in Stuttgart, home to the global headquarters. “That garage is still there, still on the property of the campus, and we are still the world’s leading manufacturer of trucks,” says Daum.
On a recent tour of Silicon Valley, he says, guides “proudly” showed him the garage where Hewlett-Packard got its start. Daum was not so impressed. “I said, ‘Guys, this was in the ’50s, and HP is not necessarily today the pinnacle of the industry. I’m not HP bashing. But it’s very rarely that you see a company for 130 years dominating the industry. And you only do that because you never think what you have today is the best forever. It enables you to get the best for tomorrow.”
This is Daimler’s version of the “humble brag”: DTNA is the best, but it can always do better. Daum doesn’t want for examples. Back in 2004, DTNA engineers built a state-of-the art “aeroacoustic” wind tunnel, the only one in North America designed specifically for long-haul trucks like Freightliner. Ten years later, the company continues to up the ante on big-rig technology, especially in the areas of safety and fuel economy.
“Transportation is all about efficiency,” says Daum. “Inefficient transportion — that’s why we don’t use horses today.”
For the layperson, it’s a bit disheartening to learn big rigs get only 10 miles per gallon, even more so to hear Daum wax enthusiastic about the yet-to-be reached holy grail: 12 miles per gallon. But long haul trucks lug 80,000 pounds of freight across the country, and every few gallons counts. Plus, says FTR’s Perry, the truck industry is actually ahead of many automakers in pursuing efficiency. DTNA, he says, is leading the pack.
Not surprisingly, Daum echoes that assertion. “In 2010 I was at an industry function, and they asked me about the future of trucking. I said, ‘Guys, we will see 10 miles per gallon during my professional lifetime.’” (At the time, trucks logged a miserly seven miles per gallon.) “Guess where we are today? Ten miles per gallon.”
“Do I know how to get to 12 miles per gallon? No, otherwise we would have it already. But we are working on it.” Figuring out how to get from seven to 10 miles per gallon cost Daimler about $2 billion over six years, Daum says. “It doesn’t come for free, so you have to be willing to drive the organization.”
That same drive animates the company’s pursuit of autonomous technology.
Last year DTNA unveiled the country’s first robotic big rig, designed for the open highway. Dubbed the Freightliner Inspiration, the truck is equipped with cameras, sensors and other technologies that provide autonomous collision avoidance, braking and speed control. In May the state of Nevada issued the first license in the U.S. for the trucks to operate on the state’s highways — albeit with a driver present.
“During my professional life, we don’t expect to see a truck without a human driver,” Daum says. “But we will see a lot of stuff with support systems like autonomous braking that will make trucks much safer.”
Self-driving down the highway: the Freightliner Inspiration
He cites sleeping at the wheel, the bane of the industry, as an example. DTNA has close to one million Freightliner trucks on the road, says Daum. “If you have .ooo1 % of guys who sleep while driving, then you have ten accidents today. So we try to overcome that human factor.”
“I like challenges,” he says. “I like to win. I like to have that vision and inspire people to let it come true. This [job] is a huge challenge, and it’s every day an unexpected twist.”
To be sure, unexpected twists are not always welcome. Last year DTNA paid $2.4 million to six former employees of the Swan Island plant to settle civil rights lawsuits. The record payout, the largest in the history of the Oregon Bureau of Labor and Industries, and lurid details — racist and homophobic slurs, Nazi graffiti — sent shockwaves through the company and the city.
Today Daum is contrite but pragmatic about the incidents. “They don’t reflect the culture,” he says. But he acknowledges DTNA mishandled the complaints in the early stages. “When you have 20,000 employees you have 0.1% or 20 knuckleheads, which is already too much,” he says. “Our mistake is we didn’t interfere fast enough. It was an oversight.”
Since the settlements, DTNA has set up new employee hotlines and implemented diversity training programs. The chief diversity officer position also expanded with Platt’s appointment last year; her role, she says, is to create a more inclusive environment: “to make sure all of our employees are respected for who they are and how they contribute.”
“We even overdo it,” says Daum, of the company’s post-lawsuit changes. “But it was inexcusable. We want to make a visible sign.” The company’s under the radar profile is vexing, he says. A few years ago, Daum says, executives realized DTNA was “virtually unknown” in Portland, to the extent that one day a member of his church said he thought Daimler had departed the city.
“And I said, ‘No, I’m the CEO, and maybe I live a dream, but it’s pretty real here.’” He launches into another spiel: “I always tease people and say if you go on any stretch of highway, I bet within a minute you see a truck that is designed, developed, planned and administered out of Portland. The guy might wear Nike shoes but you can’t see them. Freightliner trucks are the most visible Oregonian product in the United States.”
Financed with the help of $20 million in incentives from the city and state, which expect jobs in exchange, the headquarters ramps up the company’s visibility — literally, as you can now see the 9-story building from Pittock Mansion, Daum notes with pride. DTNA’s public partners were happy to accommodate.
“The Port is very much focused on creating jobs, middle class jobs, and Daimler is a poster child for that,” says Bill Wyatt of the Port, which leases land to DTNA. “The new building is beautiful. There is nothing else like it in the Superfund area.” (Ten miles of the Willamette river was designated a Superfund site in 2000).
DTNA’s manufacturing footprint has declined locally: The storied Freightliner brand that in 1999 employed 3,000 workers is now built in North Carolina and Mexico, not Portland. About 800 workers, represented by four unions, are employed at the Swan Island Western Star plant. (Relationships with DTNA management are “pretty average,” says Joe Kear, business development manager for Machinists Lodge 1005. But wages, he says, have not kept up with inflation.)
Meanwhile, headquarters demographics are growing. The company employs about 2,000 white-collar workers in Portland — a net gain of around 200 in the past two years, Daum says. Most of those positions are engineers — the new building’s collaborative spaces, ping-pong tables and streaming-video walls clearly borrow from the tech businesses DTNA is competing with for talent. “We want to be an alternative for girls and boys who finish college here to see us as a true global company,” Daum says.
Collaborating with counterparts in Japan and Germany on a broad range of cutting edge transportation systems is one of the great things about working at Daimler, says Rotz. About 285,000 people work for Daimler AG.
Other employees spotlight the company’s new emphasis on the workplace. “There has been more positive change in terms of culture, in terms of getting out in the community, in the past two years than in the preceding 14,” says Josh Palmer, project manager for the new headquarters and a 17-year Daimler veteran. Palmer ticks off a list: revamped vacation policy, the new building and employee resource groups.
The company has beefed up local partnerships with universities and, in a bit of public relations genius, now sponsors the Trail Blazers and the Timbers. Daum says his special fondness for the latter dates back to the early ‘80s, when he first saw Arvydas Sabonis, who was playing for the Soviet Union at the time. “He was an exceptional passer, three-point shooter, and had a great post game,” says Daum.
The Rose City isn’t the only Daimler beneficiary. The new 16-acre test-track loops in Madras, designed to put a semitruck through a lifetime of road travel in about six months, will employ 30 people, Daum says. “It’s not much, but I got so many thank-you notes, I tell you.”
Not everyone is so enthusiastic about company practices. During the grand opening in April, a group of neighborhood residents protested outside as part of an ongoing dispute over emissions stemming from the company’s truck painting practices.
After issuing an initial report that found no evidence DTNA was the cause of the odors, the Oregon Department of Environmental Quality, already facing criticism over an escalating airborne pollution crisis recently re-opened the case. DTNA will continue to work with the agency, says Daum, but he emphasizes there are other businesses spraying paint into the neighborhood.
Other critiques strike at the heart of the DTNA enterprise. In what might be termed an “et tu, Brute?” moment, a fellow Portland CEO, Gregg Kantor of NW Natural, dissed trucks during a recent Oregon Environmental Council Business Forum on the future of transportation.
“The No. 1 bottleneck is moving products and people through Portland,” said Kantor, speaking as co-chair of the Governor’s Transportation Vision Panel. “We are not optimizing ports and freight trains. Not a single product needs to come into the city via truck.”
Daum is undaunted. Trucks, he repeats like a mantra, are the backbone of the local and national economy. “By value 90% of all freight volume is delivered by trucks. Without trucks, you can’t have this country.”
But he is clear eyed about the challenges. The company’s own analysis shows North American demand for trucks will continue to decline in the coming year, thanks to slowing economic growth. Founded by ex-Google engineers, the autonomous truck startup Otto debuted its own test vehicle this year; Volvo Group also has a model. (Not to mention: Amazon drone shipments, anyone?) There are more promising signs. New federal rules limiting truck driver hours will likely reduce productivity, Perry observes, increasing demand for vehicles.
As Perry notes, it’s a radically new environment. But as legacy manufacturers around the country try to rebrand and stay relevant for the perk-loving, digitally-savvy millennial generation, DTNA seems ahead of the curve. Its focus on manfuacturing and knowledge workers comes across as natural and organic — a sign, perhaps of the prestige Germany has always conferred on companies that make things, especially compared to the United States, where the divide between blue collar and white collar has always been difficult to bridge.
And in a time when the nation’s transportation infrastructure is in a shambles, DTNA’s investment-in-the- future approach, from its striking new headquarters to alliances with new urban-mobility companies like Moovel, comes across as prescient and pragmatic.
Trucks may seem an odd symbol of progress, but under Daimler and Daum’s watch, that’s what they have become. Up next: Daimler’s Highway Pilot Connect initiative, which not only allows operation of self-driving trucks but also enables them to connect in a platoon formation to save fuel.
Daum points to a photo of three trucks hanging on the wall of his office: a vehicle from the early ‘50s; the current Freightliner model, and an “innovation truck” showing what the truck of the future might look like.
“Is this the pinnacle now?” asks Daum pointing to the current model. “Yes. Will it remain the pinnacle? No, and that’s why we have that fancy truck on the other side. There is a long metamorphosis from the old to the new, but every year we get a little further.”
He pauses. “Once I had a discussion with shareholders, they said: ‘Hey, we don’t have so much money, and you have too many ideas.’ I said, ‘No. We have ideas because we are alive.”