Daimler CEO wants to cut 1,100 management jobs, freeze wages

Ola Kallenius took over the role of Daimler CEO from Dieter Zetsche in May. Six months on the job, the Swede is ready to rock all the boats. German newspaper Suddeutsche Zeitung reports (translated version) that at capital markets day in London this Thursday, Kallenius will announce a cost restructuring plan that includes shedding 1,100 executive positions globally, and asking employees in Germany not to ask for pay increases. SZ learned of the plan — since confirmed by German newspaper Handelsblatt and German news agency DPA — after seeing an e-mail that Michael Brecht sent to 130,000 Daimler employees in Germany. Brecht sits on the company’s supervisory board and heads the Works Council that represents employee interests, and he is not happy, saying, “This demand rightly triggers emotions and a high level of incomprehension.”

Kallenius has stated several times that Daimler needs to cut costs, picking up the refrain from Zetsche, who said in May, “We have to cut costs and increase the efficiency throughout the company.” Corporate profit fell 29 percent in 2018, Daimler endured its first quarterly net loss in a decade in Q2 this year, going 1.2 billion euros ($1.3B U.S.) in the red, and has had to revise its earnings and profit guidance for the year. In April, Manager Magazin said Kallenius wanted to unlock 6 billion euros ($6.8B U.S.) in cost savings at Mercedes-Benz cars and 2 billion euros ($2.25B U.S.) at Daimler Trucks, and ax 10,000 jobs. The latest jobs number would eliminate 10 percent of Daimler executives in Germany. The monetary figures are drastic because the CEO needs to restore profit levels at the same time as he finds money to pay for electric powertrain investments, the costs of dieselgate recalls and gigantic fines on the way, and an expected global car-buying slowdown. 

The Works Council is already unhappy about Kallenius’ decision to outsource production of the Mercedes-Benz EQC to ZF, instead of building the electric powertrain in-house at Sindelfingen. On top of that ill will, Brecht feels lower-level employees shouldn’t bear the burden for top-level mistakes. And on top of that, the restructuring plan contravenes a Daimler labor pact from 2017 that pledged the company wouldn’t decree “operational redundancies” in Germany until 2030, and the pay freeze attempts to shut down previously agreed pay increases. Brecht and his deputy Ergun Luemali say they understand taking certain measures to improve the financials, and they’d be open to discussing voluntary buyouts, but, “We reject pure scrubbing.” 

A Daimler spokesperson said of the issues, “We are in a constructive dialog with labor representatives, but won’t comment on speculations by the works council.” Nevertheless, “Extensive countermeasures” will be required to stay competitive.