Daimler AG’s new chief executive is preparing a plan that would slash the company’s administrative costs by 20%, according to a report in Germany’s top business newspaper Handelsblatt.
Ola Kallenius, who will take over for Dieter Zetsche this week, has asked for recommendations due to the uncertainty facing car makers, the paper said. Central administration costs are to be cut by about 20%, the paper said, adding billions of euros in efficiency potential would be targeted.
Daimler declined to comment on the Handelsblatt article, which appeared as Daimler was preparing for its annual shareholders meeting in Berlin.
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Other global carmakers such as General Motors and Ford already have announced sweeping cuts as carmakers grapple with a downturn in car sales in China and uncertainty surrounding the economies in Europe and the United States, which are grappling with concerns about Brexit, a slowdown in the German economy and uncertainty over impact of unfolding trade disputes on U.S. business.
Daimler’s earning s dropped 37% in the first quarter and it is facing increasing pressure on its margins after a long spell of growth, leaving Kallenius with the challenge of trying to increase profits at the same time the company is facing massive bills from its expensive shift towards electrifying its vehicle fleet.
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Mercedes-Benz already has begun taking orders on a its new all-electric EQC, which will go on sales in Europe a bit later this year. Other German carmakers, such as Volkswagen and BMW, also moving quickly to put EVs into showrooms as they begin what promises to be a difficult shift from the internal combustion engines.
It is still not certain if consumers in the EU and the U.S. are prepared for the shift to electric vehicles. However, the shift to EVs is expected to be driven by consumers in China where EVs have strong government support.
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Kallenius said earlier this month that Daimler will cut development costs of new Mercedes-Benz cars by a significant amount by 2025 and will rely more on alliances with rivals as a way to improve margins.