Daimler Close to Mercedes Job Reduction Deal

FRANKFURT September 24, 2005; Reuters reported that DaimlerChrysler is close to striking a deal with staff at its premium Mercedes Car Group division on voluntary redundancy packages that could eliminate some 5,000 jobs in Germany, a newspaper reported.

Mercedes chief Dieter Zetsche, who will also become group chief executive at year's end, will present results of the cost-saving drive to a board meeting in Detroit at the middle of next week, the Frankfurter Allgemeine Sonntagszeitung said.

It did not cite its sources in the report, a summary of which was released ahead of publication on Sunday.

A DaimlerChrysler spokesman declined comment on the report, which said the company would incur charges in the triple-digit millions of euros for the job cuts.

Sources familiar with the discussions told Reuters that the company had not yet presented labor with a concrete number of desired job cuts.

A spokesman for the IG Metall metalworkers union in the southern German state of Baden Wuerttemberg, where Daimler is based, said a deal reached last year that swapped job security for labor cost savings in Germany was still intact.

"Forced layoffs are ruled out and this is a success," he said.

DaimlerChrysler and the works council struck a deal last year that guaranteed no worker at its German plants would be laid off in exchange for concessions that will generate 500 million euros in annual savings from 2007.

That means any job cuts would have to come via expensive buyout packages for those volunteering to go.

The accord covered about 160,000 staff on the German payroll as of last July. The group employed nearly 385,000 workers around the world at the end of last year.

Zetsche, who left U.S. arm Chrysler to run Mercedes this month, declined at the Frankfurt car show last week to discuss prospects for reducing headcount in high-cost Germany via buyout deals or early retirement, as Volkswagen (XETRA:VOWG.DE - News) aims to do.

This had to be discussed internally with the company's works council first, he said.

He stuck to the division's previous goal of generating a 7 percent operating margin by 2007, a target set by his predecessor who quit last month.

Beset by model changeovers, the strong euro, stiff losses at minicar brand Smart and spending to fix niggling quality problems, Mercedes profits have shrivelled this year.

It made an operating profit of just 12 million euros in the second quarter after restructuring costs for Smart dragged it to a rare first-quarter operating loss, but it said it had reached a turning point now and earnings should start to accelerate.

Mercedes Car Group includes the Mercedes-Benz, Smart minicar and luxury Maybach brands.