Workers fear that the savings plans will also fall victim to manufacturing jobs. Parts of the IT should be outsourced, the holding company should be cut.
The car maker Daimler is facing new cuts. Barely half a year after the Dax group decided to cut up to 15,000 of its 300,000 jobs worldwide, the Mercedes manufacturer appears to be forced to tighten its austerity measures as a result of the corona crisis.
Before the pandemic broke out, the company wanted to limit job cuts to indirect areas such as administration. However, severance payments to factory employees could also be imminent.
“Depending on how the demand for our products develops, it cannot be ruled out that the personnel measures, depending on location and function, may also extend to the production areas,” warned Daimler Works Council Chairman Michael Brecht and his deputy Ergun Lümali on Thursday in one go internal leaflet. The four-page letter is available to the Handelsblatt. A Daimler spokesman declined to comment.
The workers’ leaders emphasize that it is not yet clear how big the effects of the pandemic will be on the existing efficiency programs. At the same time, preparations are being made for talks about savings with the management. Because the pressure on Daimler is “enormous and continues to increase,” said Brecht and Lümali.
In the first quarter alone, Daimler’s passenger car sales plummeted 15 percent, and trucks and buses by as much as a fifth. The Stuttgart company was barely able to prevent a loss in the first three business months, but the free cash flow was already clearly negative.
“The balance sheets of the second quarter will relentlessly disclose how badly the corona shock will affect us economically,” the works councils are now warning and raising the alarm: “Even if short-time working will decrease again, the Executive Board intends to reduce the fixed costs and procedures to change. That is why the board wants to get to the structures. ”
Three central projects in the corporate restructuring
Accordingly, the management around CEO Ola Källenius wants to negotiate with the employees about three central projects. First, the Swabians want to significantly streamline their IT processes under the motto “Twice as Fast”. It is therefore planned to outsource essential service functions to external companies by mid-2021. “A total of 2,000 employees worldwide, including almost 900 in Germany, are to be transferred to these external companies through a transfer of business,” write Brecht and Lümali.
Second, the carmaker plans to streamline its group structure, which was only revised last year, with three separate divisions – cars, trucks, and mobility services. Specifically, Daimler AG as a holding company with its 6,000 employees is to be trimmed down. “There are currently considerations to move administrative and central areas from Daimler AG to the division companies”, the employee representatives explain in their circular.
As already reported in April, CFO Wilhelm plans to merge his 1200 employees in the holding company with the Mercedes car division, which employs a good 5,000 financiers. According to insiders, this is also based on the idea of increasingly separating Daimler Truck AG in order to provide a better basis for a possible IPO of the division in a few years.
Third, according to the works councils, Daimler is checking whether administrative activities can be bundled in parts of human resources and finance. “There are also ideas for converting partial scopes into GmbH structures. The consequences would be a reduction in personnel or further business transfers, ”warn Brecht and Lümali.
The two workers’ leaders ask Daimler boss Källenius to present binding images of the future for the individual locations. “The big picture has to be on the table – it’s all about the whole thing.” The works councils want to know: “What will our common future goal be? How is the trip going?”
The industry is in crisis
Many employees are very unsettled. The works councils have formed a negotiating group on the three core projects of the Management Board. “Only moving organization charts costs a lot of money, with unclear benefits”, they explain their point of view as a precaution. The employees expect a “clear road map” from the board and no decisions that are made “head over heels”.
The management team has long been discussing capacity cuts. “In the medium term, we have to reduce our capacities by ten to 20 percent in order to be able to utilize the plants to capacity. China is the only exception, ”says a manager. Another manager added that it was “inherently important” to expand the savings targets quickly.
The background is that the growth prospects of the entire auto industry have been obscured by Corona. At the beginning of the year, the industry had calculated a volume of 90 million cars and light commercial vehicles sold worldwide by 2020, most vehicle manufacturers and suppliers now expect only 70 million units by the end of the year. All companies must therefore currently prepare for significantly falling numbers.
The result is “Darwinism” in the industry, the management consultancy Alix Partners states in a study and predicts a tough selection. “Only the financially strong and innovative manufacturers and suppliers survive the upcoming market shakeout.”
The automotive industry as a whole “will probably not make any profits this year,” believes Elmar Kades, head of the car division at Alix Partners. Sales in Europe are likely to reach the pre-crisis level only in five years’ time.
Daimler CEO Källenius has also issued the maxim internally: “Margin comes first.” He wants to sort out models that hardly generated any returns and reduce the variance in engines. From the Scandinavian’s point of view, Covid-19 has nothing less than “exposed the Achilles heel of the auto industry”. Long development cycles and excessive fixed costs would make the industry vulnerable.
A few weeks ago, he coolly concluded: “We have to act.” Källenius could soon follow up on these announcements. In any case, he has scheduled a meeting with his top managers for the end of the month, it is said in unison in corporate circles.