Daimler AG (DMLRY) said Wednesday that long-serving CEO Dieter Zetsche would step down as CEO of the luxury automaker next year, and move to the supervisory board, in order to make room for new boss Ola Kaellenius in one of the biggest management shakeups for the iconic German group in decades.

Zetsche, 65, is one of the most respected names in the global auto industry and has led Daimler since it demerger from Chrysler in 2007, driving the group to record sales and reestablishing the Mercedes brand after years of concerns over quality and performance. However, a series of profit warnings, and spats with German labor unions, led to a shorter-than-expected extension of his term in 2015. Zetsche has also struggled to drag Daimler away from Germany's ongoing 'diselgate' scandal, which has prompted a European Commission investigation into possible collusion between the country's biggest carmakers that officials say may have denied customer access to less-polluting vehicles.

"In view of the challenges presented by the transformation of the automotive industry, the supervisory board intends to prepare a suitable succession at an early stage," the company said in a statement. "The Chairman of the Supervisory Board, Manfred Bischoff, will recommend the election of Dieter Zetsche as his successor as the Chairman of the Supervisory Board, taking effect at the end of the Annual Shareholders' Meeting in 2021."

"In order to comply with the two-year cooling-off period, Dieter Zetsche will therefore step down from his positions in the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, effective at the end of the Annual Shareholders' Meeting in 2019," Daimler added.

Daimler shares fell 1.46% to €53.94 each following news of the management changes, a move that extends their year-to-date slump to nearly 24% and values the Stuttgart-based group at just over €58 billion ($68.3 billion).

Swedish-born Kaellenius, 49, will be the first non-German to lead the group in its 94-year history after joining its International Management Associate Program as a trainee in 1993. With stints including several years at Mercedes' U.S. operations in Tuscaloosa, Alabama, Kaellenius has risen through the carmaker's ranks over the past 20 years and was placed on the management board of Mercedes-Benz marketing and sales in 2015.

The Swede, whom chairman Manfred Boschoff described as a "recognized, internationally experienced and successful Daimler executive", nonetheless faces an uphill struggle to arrest Daimler's share price decline and the broader challenges that are hammering the German automotive sector.

Domestic rival BMW AG (BMWYY) said yesterday it will post weaker-than-expected full year profits, thanks in part to costs associated with new rules on car emissions -- known as the Worldwide Harmonised Light Vehicle Test standard, WLTP -- and the ongoing uncertainty of U.S. trade policy. BMW shares extended their decline Wednesday, falling a further 1.9% to €77.51 each, a move that takes its year-to-date decline past 10.7%

Earlier this summer, Daimler said fewer-than-expected Mercedes SUV sales, as well as higher costs that can't be passed on to customers, need to be factored in to its new 2018 earnings projections "because of increased import tariffs for US vehicles into the Chinese market."

Daimler now sees full-year group earnings that are "slightly below" 2017 levels and full-year Mercedes-Benz Vans earnings that are "significantly" lower.

The new Daimler profit outlook marks a stark contrast to its early 2018 optimism, when it said worldwide car demand "continued to develop favorably in the first quarter and increased slightly" and noted that U.S. demand for cars and light trucks rose 2% from the same period last year.

Since then, however, U.S. President Donald Trump has consistently referenced the European auto sector as a potential target for tariffs in his effort to reduce what he has called "unfair" trade agreements between the United States and its largest economic partners.