Daimler AG (OTC: DDAIF) reported that it is another step closer to finalizing plans to "streamline the company" in a Nov. 29 press release. The company announced that it has reached an agreement with employee representatives to "reduce staff costs and employment in a socially responsible manner."
The Stuttgart, Germany-based vehicle manufacturer reported that it has reached an agreement on some key items with labor representatives, known as the General Works Council. In sum, the plan is aimed at cutting "thousands of jobs worldwide by the end of 2022," a number likely to be in the range of 10,000 employees.
Daimler said that in addition to the outright reductions, "natural fluctuation" will result in lower headcount as well. Other remedies like expanding the part-time retirement program and severance offering will be pursued. The agreement also allows Daimler to offer reduced hours to employees and extend expiring contracts for temporary workers. Further, management said that it plans to be "very restrictive" in its allotment of 40-hour contracts to permanent employees.
Of note, the agreed-upon job protection plan through 2029, announced when the company spun off Mercedes-Benz Cars & Vans and Daimler Trucks & Buses, remains in place.
The measures are aimed at lowering the company's variable cost structure and improving efficiency throughout the organization. Daimler plans to continue to work with employee representatives in the weeks to come to finalize plans.
The decision to reduce headcount was roughly outlined during the company's capital market day on Nov. 14. The company said that it was seeking to reduce labor expenses by 1.4 billion euros, eliminating 10% of the company's management positions worldwide by the end of 2022. The initial plan called for a 1 billion euro reduction in labor expense at Mercedes-Benz Cars & Vans along with a 300 million euro reduction in costs at Daimler Trucks & Buses.
In October, Daimler Trucks cut 900 jobs in the U.S. and 250 in Mexico in response to declining orders for North American commercial vehicles.
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This announcement is one of several announcements from original equipment manufacturers (OEMs) in recent weeks.
Navistar International Inc. (NYSE: NAV) announced that it would cut production by 15%, but didn't disclose any impacts to headcount. The company was the first truck OEM to announce curtailments in production, reversing a similar 15% production increase in 2018.
Volvo Trucks North America, Volvo Group of AB Volvo, (OTC: VLVLY) said that it plans to lay off 700 workers in January. Paccar Inc. (NASDAQ: PCAR) reported that it was scaling back production by 6% to 8% at the end of the third quarter, prompting the company to lay off 100 workers at a Kenworth facility in November. Engine maker Cummins, Inc. (NYSE: CMI) was the most recent OEM to announce cuts. The company said that it planned to lay off some 2,000 exempt employees in the first quarter of 2020.
Daimler's workforce reduction plan appears to be fairly robust, affecting potentially more than 10,000 employees and 1,100 management positions.
Daimler's justification for the streamlining is in part due to the industry's shift to carbon emissions neutrality requiring large capital investments.
"With the key points we now agreed with the works council to streamline the company, we can achieve these goals by the end of 2022. We will make the measures as socially responsible as possible," said Daimler AG's Wilfried Porth, board member and human resources labor director.
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