Mercedes-Benz abandons 64-year Kuwait partnership in questionable want for change

Daimler AG, the multinational automotive corporation and maker of Mercedes-Benz vehicles, has ended its 64-year relationship with its longstanding Kuwaiti partner Abdul Rahman Albisher & Zaid Alkazemi Company. On June 11th, 2018, a leaked letter circulated throughout Kuwait confirming the rumor of a looming termination from Daimler to end its six-decade relationship with their local partner.

With a relationship older than 95 percent of the Kuwaiti population, changing partners given such strong brand association is deeply damaging to the brand. Reasons for such a burden on the brand remain unknown, though it is believed to be due to a years-long quarrel between different shareholders of the Kuwaiti partner – an internal issue characteristic to many such companies in the region, but rarely culminating in termination.

Who is Daimler and why did it file for this ugly divorce in Kuwait? To give some context on them, it seems that the past decade has shed new darkness on the company. A slew of anti-corruption lawsuits brought against Daimler in the United States, Germany, and the EU have severely tainted their reputation and cost them plummeting profits and market share.
Arguably, the first high-profile case brought against Daimler this decade was in 2010, where it was embroiled in an anti-bribery case filed by the US Justice Department and Securities and Exchange Commission. Daimler was accused of bribing foreign government officials with gifts and money in order to secure contracts worldwide. The SEC investigation exposed around 200 cases in over 22 countries that earned the company $1.9 billion in revenue and no less than $91.4 million in purportedly illegal profits. This includes a charge of breaching the United Nations’ Oil for Food Program in Iraq during the Saddam Hussein regime, where Daimler offered the Iraqi government 10 percent in kickbacks of contract values. The suit ended with a settlement of $185 million – a mere slap on the wrist.

Daimler seemed to pay little heed to sterilize their workforce from corruption as the years to follow only brought more scandals and lawsuits. In Germany, and in the EU, Daimler was ordered to recall millions of their cars that were found to have installed an illegal software that disguised diesel emissions. And to add insult to injury, this year, Daimler along with Deutsche Telekom AG were impelled to pay $3.8 billion to the German government to end a decade-long dispute over a faulty software that was not able to calculate and accurately collect truck tolls.

Moreover, in the US, Daimler were put under scrutiny after a series of racial harassment cases rose to the surface, casting light on the company’s ethical misconduct. Daimler, in 2017, were forced to pay $750,000 to an African American worker who was subjected to a hostile work environment. Previously in 2014, they paid $2.4 million to six other minority workers to settle a racial discrimination and sexual harassment suit.

It seems clear then that Daimler has a recurring and critical issue: An untrustworthy or amoral management. Due to the notoriety of these cases, Dr Dieter Zetsche, chairman of Daimler’s management board, in an evident acknowledgement of souring sentiments surrounding the company’s volatile road of the past few years, released a seemingly penitent statement. “We have learned a lot from past experience,” he said, adding, “Today, we are a better and stronger company, and we will continue to do everything we can to maintain the highest compliance standards.”

This brings us to their latest debacle: Their mysterious change of heart with their Kuwaiti partner, Abdul Rahman Albisher & Zaid Alkazemi Company, the company with whose name the Mercedes-Benz brand has come to be inextricably bound over the decades. It seems that both their actions in the termination and in the selection process for the next Kuwaiti distributor put in question Daimler’s aforementioned statement.

The selection process is apparently causing a ruckus, where various Kuwaiti business groups are vying for the distributorship in a biased and non-level field. The process seemed to have begun months before the termination was even served to their Kuwaiti partner. According to several sources, the Daimler team in Dubai were seen in January this year dining with potential bidders (now confirmed in the running). They were also reported to be meeting those bidders earlier this year while in Kuwait when they were supposedly there to meet now former local partner.

The question arises – why was the termination necessary? According to a source, although the past few years have seen a fall in overall market demand and sales of luxury cars, Mercedes-Benz in Kuwait was the only local luxury car distributor to actually see a growth in sales volume in 2017. It seems that the shareholder quarrel didn’t impede on sales or the public image of the company.

It is difficult to comprehend how the cause would’ve justified the severity of the action taken in what is increasingly appearing to be one of the more egregious terminations of a long-running business relationship witnessed in the country. While time will be the ultimate arbiter of outcomes, public perception in the days following the announcement thus far has been indicative of the market’s negative regard of the move, broadly viewed as self-detrimental of Daimler and uncharacteristic of the straight-dealing it is accustomed to from German companies.

It therefore seems likely that what we are witnessing here is another corruption case rising to the surface. Interestingly, it is now apparent that one of the contenders in the running is the Mercedes-Benz distributor in Iraq; a country where Daimler was previously charged with corruption. Given Daimler’s history and questionable termination of its 64-year Kuwaiti partnership, could it be that they are setting themselves up for yet another scandal, one so close to home?


This article was published on 22/07/2018