DaimlerChrysler to cut 8,500 jobs at its Mercedes group in Germany

Wednesday, September 28th 2005, 12:09 pm

By: News On 6

FRANKFURT, Germany (AP) _ German-American automaker DaimlerChrysler AG said Wednesday it will cut 8,500 jobs at its Mercedes Car Group in a bid to return the troubled brand 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).

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 4 percent at 45.65 euros ($54.95) in Frankfurt trading. The company's U.S.-traded shares gained $1.89, or 3.6 percent, to $54.72 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) in restructuring costs this year.

In July, the Mercedes group posted a scant operating profit of 12 million euros ($14 million) for the second quarter, a 98 percent drop from 703 million euros in the same quarter last year. Revenue fell 4 percent to 12.4 billion euros ($14.93 billion).

The company said the unit sold 308,100 cars, a 4 percent 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) 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.

Three months after he arrived at Chrysler, Zetsche announced a plan to eliminate 26,000 white-collar jobs and shut down six plants over three years.

The ride was bumpy at first, and Chrysler reported $1 billion in losses in the second quarter of 2003. But by late 2003, Zetsche said the recovery was well under way, and that Chrysler had trimmed 30,000 jobs and lowered material costs by 15 percent.

Chrysler is now in the midst of an aggressive plan to launch 25 new or redesigned vehicles by the end of 2006. The division's U.S. sales rose 8 percent in the first eight months of this year on the strength of such popular models as the Chrysler 300 sedan and the Chrysler Town & Country minivan.