Daimler has announced its new business strategy that involves slashing costs by $1.1 billion (1 billion euros) through the reduction of management and staff jobs at Mercedes by the end of 2022.
As reported a few days ago, the German car maker intends to cut management posts in Mercedes by 10 percent and will seek to save more than 300 million euros from staff costs, in addition to slashing 250 million in fixed costs at its truck division.
Daimler’s CEO Ola Kallenius is looking at ways of increasing the company’s falling profits and ensure at the same time that the car maker will remain at the forefront of new technologies, Bloomberg reports.
The costly transition to electric vehicles and autonomous driving, as well as the ongoing trade war between the US and China, has put pressure to the Mercedes parent company to find ways of improving its profit margins.
Despite strong opposition from the works council, whose chairman, Michael Brecht, has gone on record rejecting those cuts “categorically”, the car maker claims it is in close dialog with employee representatives in a bid to make the new cost-cutting measures as acceptable as possible. Daimler also plans to improve its free cash flow by capping investments in property, plants and equipment, as well as research and development at the 2019 levels.
“The expenditure needed to achieve the CO2 targets require comprehensive measures to increase efficiency in all areas of our company,” said Ola Kallenius. “This also includes streamlining our processes and structures. This will have a negative impact on our earnings in 2020 and 2021. To remain successful in the future, we must therefore act now and significantly increase our financial strength.”
The goal is to achieve a return on sales from Mercedes Cars and Vans of at least 4 percent in 2020, which will increase to 6 percent in 2022. This includes selling more electric vehicles, which will help the company meet the tougher emission regulations in Europe.