Daimler boss Källenius wants to continue cutting staff despite billions in profits

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Daimler boss Källenius wants to continue cutting staff despite billions in profits

Daimler is again reporting lush billion-dollar profits as in the best of times, but wants to stick to its austerity course. Earlier reports suggest that up to 30,000 jobs will be lost in this way alone. “Neither we can nor do we want to give up the Swabian gene of saving,” said CEO Ola Källenius and went on a confrontation with the works council, whose boss Michael Brecht had called for a relent in the face of well-running business. “If we have full order books and the profits are gushing, how should the workforce understand the cost-cutting measures that should run over the years?”, Said Brecht Automobile week.

Around a year ago, at the beginning of the pandemic, due to the deep red numbers and a slump in demand, Daimler tightened its austerity measures again. Thousands of jobs are to be cut, primarily through severance programs. The group does not comment on the figures, but confirms significant savings, which are also likely to be more extensive compared to other car manufacturers such as Volkswagen and BMW. As a first step, BMW had confirmed the shedding of around 6,000 jobs during the crisis, while Volkswagen saved primarily through a temporary freeze on new hires.

Despite the ongoing Covid 19 pandemic and delivery bottlenecks for important electronic components, the first half of the year went brilliantly for Daimler. By the end of June, the company had earned € 7.9 billion net, after a loss of € 1.9 billion in the same period of the previous year. Compared to the pandemic-related collapse in business a year ago, sales climbed by 25 percent to 84.5 billion euros.

Källenius found that, despite good business figures, further work had to be done on efficiency, especially since Daimler is currently spending “considerable billions” on the targeted conversion from internal combustion to electric motors. A departure from the austerity course would be “not the best strategy for coping with the transformation”, judged Källenius and drew the comparison to an exceptional athlete. When he hears the question of whether the austerity program cannot be mitigated, it is like a top athlete saying: “Well, now I’m training a little less, I’m already fast.” That is the wrong mentality. The decade of transformation will be expensive. One should not collect cost reductions again just because “the interim spurt looks financially good”.

Daimler had around 298,700 employees worldwide at the end of 2019, 293,700 in mid-2020 and now 289,600. The number is likely to continue to decline, although Daimler is not only cutting jobs, but also creating thousands of new jobs, especially in the software segment, which is one of the decisive factors for electromobility. Brecht described the situation as “crazy”. On the one hand, the company spends hundreds of millions of euros to send people home. On the other hand, hire thousands of software specialists. Efficiency cannot be the only yardstick. “We have to see that we develop people into new functions or that we can create additional added value for the customer with the existing staff.”

In fact, like other corporations, Daimler invests a lot of money in training programs. But the fact that an expert in the internal combustion engine turns into a software programmer is likely to remain an exception. In the electric age, established car manufacturers not only have to hold their own against the usual competition, but also against digital companies such as Google, Apple or Alibaba. These are moving into the field of automobile manufacturers, because with e-cars the importance of software is at least as important as the pure car experience. Industry expert Ferdinand Dudenhöffer says vehicle software will be the “dominant topic” for the next 20 years.

All manufacturers are desperately trying to expand their software expertise by recruiting talent. The market is extremely competitive. This is another reason why employer and employee representatives at Daimler are negotiating special collective agreements for electrical engineers and software experts. According to reports, in order to lure them at all, they should be offered more flexible working hours and bonus models, among other things.

This is still a long way off, because so far Daimler has made by far the most money with cars that have an internal combustion engine. It could look different in a few years. So far, the stipulation has been that electric and hybrid cars should account for half of car sales by 2030. It is quite possible that, in view of the growing competition in this area, Daimler has announced even more courageous goals: On July 22, the group invited investors to update its electrical planning.


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