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Daimler to Cut White-Collar Staff by 6,000

The move is part of CEO Dieter Zetsche's effort to reduce costs. About 25% of the jobs affected are in the U.S. and Canada.

January 25, 2006|From Bloomberg News

DaimlerChrysler, the world's fifth-largest carmaker, plans to eliminate 6,000 administrative jobs as new Chief Executive Dieter Zetsche deepens cost cuts.

The maker of Mercedes and Chrysler sedans will save 1.5 billion euros ($1.8 billion) a year with the latest reductions, Zetsche said Tuesday. The move will cost Stuttgart, Germany-based DaimlerChrysler 2 billion euros and comes after Zetsche cut 8,500 manufacturing positions at Mercedes.

"Middle management will pay a high toll in this round of cuts, and overall this is a very positive move," said Michael Raab, an analyst at Sal Oppenheim in Frankfurt, Germany.

About 60% of the company's administrative and management positions are in Germany and 25% in the U.S. and Canada, with the remainder spread throughout the world, Zetsche said. The reductions may be roughly in proportion to those figures, he said.

The changes announced Tuesday are equivalent to about 20% of the administrative staff and 30% of management, Zetsche said. DaimlerChrysler is also combining responsibilities among management board members and adding a van and bus operation.

DaimlerChrysler shares rose $2.60 to $54.84 in U.S. trading.

Zetsche was named to replace Juergen Schrempp as CEO. Zetsche is struggling to lower costs as competition heats up in the U.S. from Japanese automakers and in Europe from BMW, the world's largest manufacturer of luxury cars.

"We have started an efficiency program at all our divisions," said Zetsche, who took over Jan. 1. "Our aim is to create a lean, agile structure."

The announcement comes a day after Ford Motor Co., which along with General Motors Corp. is burdened with unprofitable North American operations, said it would slash 30,000 jobs.

"There has been real progress at DaimlerChrysler compared with Ford and GM," said Garel Rhys, professor of automotive economics at Cardiff Business School in Wales. "They got the job cuts size right at Chrysler, and the only way to turn Mercedes around is to do the same thing."

DaimlerChrysler reached an agreement in 2004 with Mercedes workers in Germany to increase working hours, slow pay increases and save the carmaker about 500 million euros annually. In exchange, DaimlerChrysler agreed not to fire workers until 2012.

Zetsche said the balance in management between Germany and the U.S. headquarters in Auburn Hills, Mich., "will stay what it is today."

Board members will take on double roles, with Zetsche remaining head of both Mercedes and DaimlerChrysler.

"Consolidation will occur at all levels starting with me," he said.

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