German automaker Daimler has announced that they will be cutting several jobs in an attempt to set them up for future manufacturing.
There's been pressure on car manufacturers to develop electrification technology and meet certain CO2 targets. Daimler is one such company and, speaking during an investor meeting in London this week, CEO Ola Kaellenius revealed plans to fund such a drive.
“We are positioning the company for the transformation with a clear strategy for the future," he said. "The expenditure needed to achieve the CO2 targets require comprehensive measures to increase efficiency in all areas of our company. This also includes streamlining our processes and structures.
Daimler's new CEO is cutting $1.4 billion in jobs and capping investment as he warns of a painful transition to electric and autonomous cars. Even 20 new hybrid or electric models in the next 2 years only puts them "within reach" of new EU pollution limits https://t.co/xfcNgTenmH— Tom Randall (@tsrandall) November 14, 2019
“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.”
There wasn't any indication as it relates to the exact number of jobs under threat but earlier reports suggest it will be around 1,100, mainly consisting of managerial positions. Many of those positions could be cut through voluntary redundancy because of Germany's stringent labor laws.
Daimler is aiming to save $1.1 billion in costs by the end of 2022 and, in addition to job cuts, will also restructure wages and reduce spending in areas such as property investments, plant, and equipment ventures, as well as research and development. The company will also narrow its focus to higher-margin vehicles.
The German entity expects better sales in the years to come. They project that there will be a three percent increase in sales over the course of next year. Daimler admits it will have to sell way more electric cars to meet emission regulations in Europe and those have significantly lower margins than gas or diesel-powered vehicles.
According to Kaellenius, this will impact earnings negatively through 2020 and 2021, while tariffs could potentially make things work.
Source: AP News