Daimler boss warns workers of need for painful cutbacks

Daimler chief executive Ola Kallenius said the maker of Mercedes-Benz cars and the industry as a whole faced painful cutbacks to overcome the economic fallout of the pandemic.

The virus outbreak will force manufacturers to do more significant restructuring than they had planned for before the crisis erupted, Mr Kallenius said during a webcast hosted by Germany's largest labour union IG Metall.

He said the “significantly harsher reality” for the industry following Covid-19 would necessitate “drastic” salary cuts, with Daimler executives facing bigger reductions than rank-and-file workers. The adjustments were necessary to protect Daimler’s financial condition and safeguard investments in future technologies, according to the CEO.

The virus outbreak shuttered factories and showrooms across the world, exacerbating Daimler’s struggle to execute a deep restructuring announced last year. Mr Kallenius indicated in April that the planned measures might not be enough in light of the dramatic market contraction.

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The company and its German peers Volkswagen and BMW are bracing for second-quarter losses.

While the German auto industry’s prospects are slowly starting to improve, with demand recovering in markets including China and France, companies still rate the current situation as “very pessimistic”, Munich-based Ifo Institut said on Thursday in a statement.

The group’s employment indicator fell four points to minus 54.4 points in June – worse than during the 2009 financial crisis.

Workforce

Daimler’s restructuring plan, issued in November, called for cutting its workforce by more than 10,000 to slash €1.4 billion off personnel spending by 2022. Another 10,000 jobs could be axed through 2025, trade magazine Automobilwoche reported last month, citing unidentified company sources.

Daimler, which had about 299,000 employees at the end of 2019, called the report “speculation”.

Daimler shares was trading 4.9 per cent higher by mid-afternoon in Frankfurt on Thursday.

Mr Kallenius must brace for critical questions from investors at Daimler's agm next week, his first one as CEO after succeeding veteran leader Dieter Zetsche last year.

The stock is down 26 per cent this year, giving Daimler a market value of about €39 billion – less than a quarter of Tesla. – Bloomberg