‘More with less’ to become a goal at DaimlerChrysler

‘More with less’ to become a goal at DaimlerChrysler

September 29, 2005

DaimlerChrysler AG chairman-in-waiting Dieter Zetsche, famous for cutting costs and turning around Chrysler, took his first steps Wednesday at getting Mercedes in shape.

Zetsche left Auburn Hills-based Chrysler Group this month to take over the ailing German-based Mercedes Car Group of DaimlerChrysler. He is to become chairman of the entire company in January.

DaimlerChrysler announced Wednesday that it would be cutting 8,500 employees, or about 8% of the workforce, at Mercedes at a cost in buyout packages of about $1.1 billion. The company’s stock rose $2, or about 4%, to $54.83 Wednesday.

Higher costs and a drive to improve productivity led to the need to have fewer workers, said Gunther Fleig, DaimlerChrysler’s director of human resources and labor relations, in a conference call.

“These headcount reductions are indispensable because of economic conditions,” Fleig said.

Since taking over Mercedes, Zetsche has said the company needs to cut costs and focus on profitability. “More with less” has become his mantra.

After an operating loss of $1.2 billion in the first quarter of 2005, Mercedes posted an operating profit of $15 million in the second quarter, but the group’s numbers were still down from $856 million the same quarter a year ago

In a meeting earlier this week with the Free Press in Auburn Hills, Zetsche hinted that job reductions would be on the way soon. He said Mercedes needs to do two things: please the customer and make money, something he jokingly called a “minor part” of the business.

“If that minor part of the business isn’t fulfilled, we have a problem,” Zetsche said. “That’s what we intend to address and will address.”

The idea of DaimlerChrysler making major job cuts should be familiar to metro Detroit. After the 1998 merger that brought Mercedes and Chrysler together, Chrysler quickly became the source of a turnaround plan.

In late 2000, Zetsche arrived in Auburn Hills and helped revive Chrysler Group by trimming the workforce and developing an exciting lineup of cars.

Chrysler Group has cut at least 40,000 workers since 2000. It had an operating profit of $658 million in the second quarter of 2004.

“I think probably Dieter Zetsche is applying the same kind of methods he applied to Chrysler to Mercedes in Germany,” said David Healy, an analyst who follows the company for New York-based Burnham Securities.

Mercedes doesn’t need as much work as Chrysler did in 2000, Healy said. Mercedes sales have held steady in the last year, despite the lag in profits.

“I think Chrysler lost a lot of market share, which has not been the case for Mercedes,” Healy said.

But Zetsche could be the executive to finally get both Mercedes and Chrysler doing well at the same time, Healy said.

“I think there’s going to be some powerful earnings numbers if they get all of their segments profitable at the same time,” he said.

Contact JOE GUY COLLIER at 313-222-6512 or collier@freepress.com.


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