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Mercedes-Benz makes job cuts to save over US$1 billion

Mercedes-Benz Cars plans to save more than US$1.1 billion in personnel costs by the end of 2022 to compensate for “high investment” to meet global CO2 regulations. Jobs will be reduced in both management and the indirect areas, said a press release. Marketing has reached out to Daimler for more information.

Parent company, Daimler said it is in close dialog with the employee representatives in order to make the measures as acceptable as possible. The job cuts are part of its “systematic countermeasures” to sustainably improve its cost structure and offset expected margin erosion. Besides meeting CO2 targets, the expanded range of plug-in hybrids and all-electric vehicles is also leading to cost increases that will have a negative impact on Mercedes-Benz Cars’ return on sales.

Ola Källenius, chairman of the board of management of Daimler AG and Mercedes-Benz AG, explained: “The expenditure needed to achieve the CO2 targets require comprehensive measures to increase efficiency in all areas of our company. This also includes streamlining our processes and structure.”

To cushion negative impact on Daimler’s earnings in 2020 and 2021, Källenius said it is imperative for the company to act now and significantly increase its financial strength. However, with a clear commitment to CO2-neutral mobility, he said the company is “setting its course for a successful future”.

To strengthen the free cash flow, investment in property, plant and equipment as well as in research and development for Mercedes-Benz cars segment will be capped at the 2019 level and be reduced in the medium term. Strategically, Mercedes-Benz Cars aims to position itself as a “pioneer of sustainable modern luxury” and develop the brand accordingly.

For the Mercedes-Benz Vans segment, the company will be reducing material costs as well as personnel costs by US$1.1 million to increase its competitiveness in the sector. On this basis, the division Mercedes-Benz Cars and Vans expects to achieve a return on sales from operating activities of at least 4% in the year 2020 and at least 6% in 2022.

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