DaimlerChrysler to Cut 8,500 Mercedes Jobs (Germany

DaimlerChrysler to Cut 8,500 Mercedes Jobs Wednesday September 28, 11:04 pm ET By Matt Moore, AP Business Writer DaimlerChrysler to Cut 8,500 Jobs at Mercedes Car Group in Germany in Bid to Turn Brand Around

FRANKFURT, Germany (AP) -- Automaker DaimlerChrysler AG said Wednesday it will cut 8,500 jobs in Germany at its Mercedes Car Group in a bid to return the troubled brand to profitability.

The company said the cuts will come through voluntary termination agreements over the next year and result in charges of 950 million euros ($1.11 billion).

ADVERTISEMENT DaimlerChrysler, the world's fifth-largest car maker, said the charges will be posted in the fourth quarter and aren't expected to hamper the company's outlook. The automaker had said previously that it expects to beat last's year operating profit of 5.8 billion euros ($7 billion).

The announcement came after Dieter Zetsche, who took control of Mercedes this month and is set to become chief executive of DaimlerChrysler at the beginning of 2006, outlined the plan to the company's supervisory board in the United States earlier in the day.

The Mercedes division was once the pride of the company, and industry watchers are keen to see if Zetsche can invigorate it the way he did Chrysler, which posted its eighth straight quarterly operating profit in July.

DaimlerChrysler shares closed up nearly 4 percent at 45.65 euros ($54.95) in Frankfurt trading. The company's U.S.-traded shares rose $2, or 3.8 percent, to close at $54.83 Wednesday on the New York Stock Exchange.

Finance director Bodo Uebber said in a conference call the company's supervisory board accepted the recommendations and approved the plan.

"The supervisory board has taken this into consideration and they agreed to make the necessary budget available," he said. "The works council, they agreed, they accepted this."

Under the initial outline, workers can volunteer to be phased out and will be given financial benefits, including job training and help in starting their own business, if needed, said Guenther Fleig, human resources director for the company's management board.

"This decision to reduce the number our employees hasn't come easy to us, but we have created the basis for profitable growth in the future," he said. "We are making a very fair offer to our employees, a very attractive offer."

The program will target workers at plants in Sindelfingen and Bremen, which produce the C-Class cars.

Works council spokesman Erich Klemm agreed that there was a surplus in the number of workers, but said no one would be forced to leave Mercedes under the terms of a deal signed in 2004. That agreement guarantees employment through 2011.

Fleig said the Mercedes unit had too many employees, adding that high costs for raw materials and currency fluctuations, along with intense competition, was making it hard to turn a profit.

"This needs to be adjusted. That is our aim, to improve the competition by improving productivity," he said.

But it will be a bitter pill for Germany, which is suffering from 11.6 percent unemployment and almost no growth.

Earlier this week, Volkswagen AG said it would reduce its work force in western Germany from the 103,000 currently employed, offering early retirement packages and severance in the hope that employees would leave voluntarily. VW did not say how many jobs it was seeking to cut.

GM announced plans last year to cut as many as 10,000 jobs at Adam Opel in Germany. GM Chairman and CEO Rick Wagoner said this month at the Frankfurt auto show that the company is about halfway through that plan.

The Mercedes group, which includes the flagship Mercedes-Benz models as well as the Smart mini-car and luxury Maybach, employs 106,300 workers, about 94,000 of them in Germany.

The unit has struggled this year, facing a 1.3-million car recall amid quality problems and owner dissatisfaction. In April, DaimlerChrysler announced a 1.2 billion euro ($1.44 billion) restructuring of Smart that led to nearly 600 job cuts.

In July, the Mercedes group posted a scant operating profit of 12 million Euros ($14 million) for the second quarter, a 98 percent drop from 703 million euros in the same quarter last year.

Analysts cheered Zetsche's decision to oversee Mercedes. Three months after he arrived at Chrysler in 2000, Zetsche announced a plan to eliminate 26,000 white-collar jobs and shut down six plants over three years.

The ride was bumpy at first, and Chrysler reported $1 billion in losses in the second quarter of 2003. But by late that year, Zetsche said the recovery was well under way, and that Chrysler had trimmed 30,000 jobs and lowered material costs by 15 percent.

Chrysler is now in the midst of an aggressive plan to launch 25 new or redesigned vehicles by the end of 2006. The division's U.S. sales rose 8 percent in the first eight months of this year on the strength of such popular models as the Chrysler 300 sedan and the Chrysler Town & Country minivan.

David Healy, an auto analyst with Burnham Securities, said Mercedes has already begun showing signs of recovery, in part because it has cut its warranty costs. But the layoffs should speed that process.

"Dieter Zetsche is applying some of the techniques he used at Chrysler," Healy. "His fresh approach to the income statement and the cost levels and his U.S. experience is what's behind all this."

" Works council spokesman Erich Klemm agreed that there was a surplus in the number of workers, but said no one would be forced to leave Mercedes under the terms of a deal signed in 2004. That agreement guarantees employment through 2011.

WTF? What a contract! Guaranteed work for seven years! Then they can buy you out!

2 posted on 09/28/2005 10:05:02 PM PDT by endthematrix (JOHN ROBERTS vs JOE BIDEN ................... ROBERTS wins TKO in second round!)

German labor laws.

Don't look for logic. Sheer stupidity is all you will find.

"Under the initial outline, workers can volunteer to be phased out and will be given financial benefits, including job training and help in starting their own business, if needed..."
I am not sure that I would particularly like to part with the employees possessing the entreprenerial moxie, as could be inferred from the above quote. I'd think that this quality would make them more valuable than the others, other things being equal.

Along with their dead heat election, this reminds me of Jimmy C's "days of malaise".

Pity them.

(what Kind of Indian are you, BTW?)

Don't blame just the German labor laws...

This is a worldwide trend - it's called "world is flattening".
The manufacturing is moving to lower labour cost countries:
China and India....

It took a bit longer for Europe...

Come on! Don't blame Germany? Give me a break.

As bad as US regulations and labor laws are, which always force manufacturing out of the country, Germany is by far the basket case.

You simply cannot fire or layoff workers in Germany. Work week is 35 hours (or less).

That is a bunch of nonsense. Companies in Germany are forced to pay the employees for years and help them until death. The folks losing the jobs (and still getting paid) are not the entrepreneurial kind.

This is not a law, it's an agreement from 2004. Since then employees work 40 hours per week without pay rise.

The sales of the German company Daimler Chrysler has fallen on bad times. No doubt the despicable behavior of Germany's leaders toward the U.S. has affected sales.

There is another reason. Americans are perhaps learning that the two American automobile manufacturers, GM and Ford, are making cars equal to and sometimes better than any foreign car-maker.

Better engineered American cars began to appear in the early 90s and they have improved almost every year since.

I just turned in a 98 Ford Taurus after putting 220,000 trouble-free miles on it with only normal maintenance. It was still running good and brought a good trade-in amount.

"...Germany is by far the basket case."

And sad to say, the German election results are not going to help. Investors do not like uncertainty or the type of highly-regulated business conditions in Germany right now. The public seems hesitant about reform and risks losing more by trying to hold on to everything. And so goes Germany, so goes the rest of the continent. Tough times ahead for Europe. So much of it self-inflicted.

As each one of the Mercedes guys are gently terminated...they are handed a check for $140k and they start collecting unemployment comp for at least 12 months. The older guys who are near 55...will likely get offered full retirement, and they will make up over half of this 8,500. The deal is nice...but on a economic scale...the company is really screwing its stockholders. I wouldn't hold their stock...nor any other German auto maker...right now. All of them are in the same boat. Cheaper cars from Asia simply beat the German production system everytime.

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