* Strategy informed by early career at Daimler, Permira
* Booming e-commerce shaking up retail
* Shareholders claim need for more retail expertise
* CEO's contract expires in 2015, says he enjoys job
By Emma Thomasson and Matthias Inverardi
FRANKFURT, March 25 (Reuters) - Technology entrepreneur,merger manager and turnaround expert, Olaf Koch believes he hasenough experience of big challenges to steer Europe'sfourth-biggest retailer Metro through its next one: e-commerce.
In so doing, the tall 43-year-old chief executive aims toreturn the group to revenue growth and clean up its balancesheet to improve a credit rating that was cut to just above junkterritory in 2012 at the height of the euro zone debt crisis.
But Koch may have a fight on his hands.
A recent report suggested that Metro's biggest shareholder,family-owned conglomerate Haniel, threatened not to extend hiscontract past 2015 because of a difference over strategy - whileother investors contend the former finance chief does not knowenough about retail operations to help the sprawling group,present in 32 countries with some 2,200 outlets, counter weakconsumer confidence and growing online competition.
Koch himself, whose imposing, shaven-headed appearance sitsat odds with his soft voice and easy manner, believes he has thewherewithal to meet that challenge.
"The core element in retail is change. Whoever doesn't keepup with the speed of change will have big difficulties," he saysduring an interview at the Reuters office in Frankfurt.
Koch, 43, started his career in 1994 at German auto makerDaimler, founded his own technology consulting firm in 1996, andthen came back to Daimler just after its ultimately ill-fatedmerger with Chrysler in 1998 - a tie-up prompted by overcapacityin the industry similar to that being suffered by retailers nowas trade shifts online.
He worked as a senior manager for Daimler's "corporate warroom" on the integration of the German and U.S. carmakers andwas then promoted in 2002 to board member with responsibilityfor finance and strategy at Mercedes.
After moving to private equity firm Permira in 2007, Kochgot his first taste of the retail trade as board member at HugoBoss, helping launch a turnaround plan after Permirabought a majority stake in the German fashion house. He joinedMetro two years later in 2009 as chief financial officer.
Koch took over as CEO in January 2012 after Metro wasplunged into a leadership crisis when his predecessor and mentorEckhard Cordes - with whom he worked at Daimler - lost support.
"I have learnt that change is opportunity and not a threat,"Koch says.
STRATEGY STRUGGLE
E-commerce is forecast to grow 25 percent in Germany thisyear, more than compensating for a 1 percent drop in storetrade, and making it a vital channel for Metro.
The group's consumer electronics firm, Media-Saturn -Europe's biggest - only launched online sales two years ago butis already on track to make 10 percent of sales from e-commerceby 2015.
That is still low compared to rivals like Dixons and Darty, but it's a base from which to take on newchallengers like newly-listed domestic appliance e-tailer AOWorld, which is eyeing the German market.
Koch said Media-Saturn can trump pure online players bycapitalising on its store network, noting that 44 percent ofcustomers who buy online pick up in the store.
"We are still rather at the beginning of the (Metro group'soverall) transformation, perhaps 20 to 25 percent. There isstill another 75 percent to go. I believe that we can achievethis potential," he said.
Not everyone agrees with this strategy, however.
Some of Metro's shareholders want to see Koch taking boldermeasures such as selling off more of the group in order to raisecash and invest in new markets.
Metro was forced to deny a report in January that Haniel hadthreatened not to extend Koch's contract - which runs untilSept. 13, 2015 - unless he agreed to a breakup of the group.
Since then Koch has had to delay the stock market listing ofa quarter of its Russian cash-and-carry wholesale operation -which had been expected to fetch at least 1 billion euros ($1.38billion) - owing to market turmoil over the Ukraine crisis.
Metro has also tried in vain for years to sell off itsKaufhof department stores and Real hypermarkets divisions inGermany to focus on cash-and-carry and consumer electronics,which have better expansion prospects in growth markets.
Koch strongly disagrees with that strategy - "Breaking it upwould be value-destroying" - and also says it is not importantto get Metro back into Germany's main blue-chip stock index,because that could prompt thinking more aimed at boosting theshort-term share price than long-term profits.
Some investors see the numbers expert as too focused onfinance and not enough on operational performance. Others blamehim for Metro losing its title as Germany's biggest retailer tothe Schwarz group that owns discounter chain Lidl.
"Metro does not only need finance experts but also retailersat the top," Ingo Speich, portfolio manager at shareholder UnionInvestment, told last month's annual general meeting, asking for"more creativity and entrepreneurial spirit."
In response, Koch says he's going to keep at it.
"You can see that I have a long-term interest in the companyfrom the fact that I keep buying shares," he says. "I enjoy thejob a lot." (Editing by Sophie Walker)
