Mercedes CEO Wants To Slash 1,100 Management Jobs, Freeze All Salaries As Part Of Cost-Cutting Program

As it grapples with recalls, costly fines over illegal diesel engine software and a slowing global market, Daimler is embarking on an austerity program that, if implemented, will see it cut 10 per cent of its management jobs (1,100 positions) and freeze its 300,000 workers’ paychecks in Germany.

That’s according to German daily Süddeutsche Zeitung, Mercedes-Benz’s parent company, who cites an email sent to staff by the group’s works council. The news was confirmed by Handelsblatt and German news agency DPA.

Daimler refused to confirm the cuts, which will reportedly be announced by CEO Ola Kallenius at the company’s capital markets day in London on Thursday. Kallenius will reportedly also ask German workers not to request pay rises as the automaker battles global trade tensions, costly recalls and a huge fine imposed by German authorities for cheating on emissions testing.

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The company has made a provision of 2.6 billion euros to cover diesel-related expenses in the first half of 2019 after German regulator KBA ordered a recall of 60,000 GLK models, claiming the vehicles made use of illegal engine software. It, however, declined to break down in detail how much of the amount was allocated for recalls, updates and potential fines and litigation. Moreover, it suffered a net loss of €1.2 billion ($1.3 billion) in the second quarter, its first three-month loss in 10 years.

These news were not well received by its staff, though – especially the demand for suspending pay rises. Chairman of the general works council and member of Daimler’s supervisory board, Michael Brecht, was adamant that those measures would not be accepted: “This demand rightly triggers emotions and a high level of incomprehension,” he said. And even though he concedes that cost cutting is inevitable, he finds Kallenius’ proposals disproportionate to the company’s financial situation and, therefore, rejects them “categorically”.

Kallenius and Brecht held talks, but failed to come to an agreement. “This is like the current season, not yet frozen, but it is getting more and more stormy and the clouds are getting darker,” Brecht commented on the issue.