What is Daimler trying to achieve through job cuts?

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Daimler has just confirmed the massive job cuts. Approximately 1,100 executive positions will be slashed in the upcoming months in a bid to reduce costs. How much is Daimler trying to spare?

The company announced the business strategy that will help the company reduce costs, in meetings that took place in London and subsequently, New York. The elimination of the management positions will help the company slash expenses by $1.1 billion (approximately 1 billion Euros). The deadline should be 2022.

The measure involves the cutting of management positions by 10% and saving more than 300 million Euros from staff costs, as the firing of the personnel will also bring a slash of 250 million in fixed costs at the company’s truck division.

The CEO that replaced Dr. Dieter Zetsche this past May, Ola Kallenius, is making efforts to increase the company’s profitability, in a plunge for the past few months, due to the financial investments in new technologies and electromobility. The progressive switch from the development of the combustion engine to those of electric engines and batteries, together with the focus on autonomous driving, have been putting a lot of pressure on Daimler. The company is also chasing after the ever-stringent CO2 targets, by electrifying its entire passenger cars fleet and selling more zero-emission vehicles across Europe and, eventually, the United States.

Reportedly imposed by the German Federal Motor Transport Authority (KBA), according to the German magazine Der Spiegel, the fines for the diesel emissions cheating software installed in the vehicles, in amount of $1.1 million, would also a major setback. The investigation is still in progress and may not be over before the end of the year. Regardless of the conclusion of the prosecutors, approximately 280,000 vehicles have been recalled.

The Mercedes-Benz parent company is thus trying to achieve a return on sales of at least 4% by 2020, going as high as 6% by 2022.