Zetsche’s Contract Renewed, Has to Close Gap of 220,000 Units to BMW image

Daimler is extending CEO Dieter Zetsche’s contract until 2018, giving him the chance to reach its target of making Mercedes the no.1 automaker.

On February 21st, Daimler’s supervisory board is expected to expand Zetsche’s contract by five more years until the end of 2018. Zetschee, 59, was named Daimler’s CEO seven years ago, taking the place of Juergen Schrempp and moving forward with his empire-building strategy. During these five years, Zetsche has to find a solution not only to close the gap of 220,000 vehicles to BMW, but also surpass the German rival.

Daimler had two chances to boost profitability and take back sales, and it missed both of them. Analysts expect Daimler to report fourth-quarter earnings down 14%, compared with a 22% increase seen by BMW and 15% at VW.

“He needs to find a way to ensure Mercedes makes cars that people want to buy again. Without that, Mercedes’ independent future becomes less certain,” said analyst Max Warburton.

The fact that Daimler extends Zetsche’s contract, shows the company’s confidence that the CEO is able to take back the lead lost in 2005 to BMW. In 2011 Mercedes fell on the third place, behind BMW and Audi.