DaimlerChrysler Drops Axe on 8500 Jobs at Mercedes

DaimlerChrysler one of the most celebrated German auto major today slashed 8500 jobs at its Mercedes Car Group in a bid to prevent the troubled brand from sinking and bring it back to profitability.

The company said the cuts, which will take place in Germany, will come through voluntary termination agreements over the next 12 months and result in charges of 950 million euros ($1.11 billion US).

DaimlerChrysler said the charges will be posted in the fourth quarter and aren’t expected to hamper the company’s outlook. The automaker had said previously that it expects to beat last’s year operating profit of 5.8 billion euros.

The announcement from the company’s headquarters in Stuttgart came after Dieter Zetsche, who took control of Mercedes this month and is set to become chief executive of DaimlerChrysler at the beginning of 2006, outlined the plan to the company’s supervisory board in the United States earlier in the day.

DaimlerChrysler shares closed up nearly four per cent at 45.65 euros ($54.95 US) in Frankfurt trading. The company’s U.S.-traded shares gained $1.89, or 3.6 per cent, to $54.72 US in early afternoon trading on the New York Stock Exchange.

The Mercedes division was once the pride of DaimlerChrysler and industry watchers are keen to see if Zetsche can invigorate it the way he did Chrysler, which posted its eighth straight quarterly operating profit in July.

The group, which includes the flagship Mercedes-Benz models, as well as the Smart mini-car and luxury Maybach, employs some 106,300 workers, 94,000 of them in Germany.

The Mercedes group has struggled this year, facing a 1.3-million car recall amid quality problems and owner dissatisfaction. The company had already said it was looking at some 1.2 billion euros ($1.4 billion US) in restructuring costs this year.

In July, the Mercedes group posted a scant operating profit of 12 million euros ($14 million US) for the second quarter, a 98 per cent drop from 703 million euros in the same quarter last year. Revenue fell four per cent to 12.4 billion euros ($14.93 billion US).

The company said the unit sold 308,100 cars, a four per cent drop from last year that it blamed on fewer sales by compact car business Smart.

In April, DaimlerChrysler announced a 1.2 billion euro ($1.44 billion US) restructuring of Smart that led to nearly 600 job cuts.

Analysts cheered Zetsche’s decision to oversee Mercedes, noting that his efforts helped turn around the Chrysler Group when he took it over in 2000.

With this effort Chrysler is sure to overcome the bumpy ride and is in a process of introducing 25 variants or new models in market in 2006 to fight back to bring its lost sheen and bring back the cannotation Mercedes stood for Customer Satisfaction.