Financial Goal Daimler Speeds Up Change

Daimler, the maker of Mercedes-Benz, wants to produce more cars more efficiently and raise sales each year by 10 percent.
Mercedes needs to hit the gas.

Sometimes, a company needs a new motto to get the message across to its employees.

This is why Dieter Zetsche, Daimler’s chief executive, updated his "Fit for Leadership" program. It is now called “Next stage”.

A new strategy has already helped Daimler to save €2 million ($2.3 million) in costs.

But it hasn’t made the Stuttgart-based car maker, which sold 2.5 million cars in 2014, the market leader yet. Audi and BMW are still well ahead of Daimler, in terms of sales and profit.

This is why Daimler wants to do more. It wants to increase revenue growth from its current level of 8.1 percent to 10 percent. The company did not specify a timetable for this target.

Daimler is likely to make sure employees are on board.

One area it is likely to focus on is the Mercedes brand. Its new models are selling well and in 2014, the brand grew faster than its rivals. But in an internal analysis, Mercedes found that the two Bavarian based firms Audi and BMW have a more efficient production line.

They have better materials and a higher level of vertical manufacturing. Mercedes still builds its own gear boxes, BMW buys it elsewhere. The car maker, which is headquartered in Munich, is faster at reacting to market trends and able to switch production from diesel to petrol easily, in case sales fall in Europe and it has to ship its cars to China. This kind of flexibility will become more important in the future when electric hybrid and fuel-celled engines will become part of the portfolio.

“We’re losing on the range of production and but are winning on volume,” said Michael Brecht, head of the Daimler supervisory board, which represents workers and oversees management. From this summer, factories such as the one in Rastatt, a baroque city in south western Germany, will increase the number of cars they are producing from 50 000 to at least 350 000.

In Bremen, where Daimler produces mostly its C-class cars, the company plans to produce 400 000 cars instead of 60 000, as they do now.

On the one hand, the employees know that Mercedes’ factories in Germany are the backbone to its growth plans. On the other hand, Mercedes is building its newest models in Eastern Europe and overseas

The planned changes will affect employees.

Parts of its manufacturing logistics will be outsourced. In total, the factories are supposed to increase their efficiency by three percent annually.

Mercedes largest factory, the production site in Sindelfingen with 22, 000 employees, is seen as a model for how all of the company’s factories should operate.

Daimler wants to save millions of euros in Sindelfingen, but it also wants to invest up to €1.5 billion until 2020.

On top of all that, Mr. Zetsche has promised that the factory start making a new model which will be derived from the Mercedes E or S-class.

Mr. Brecht and Mercedes’ employees are carefully exploring the options available to them.

On the one hand, the employees know that Mercedes’ factories in Germany are the backbone to its growth plans. The weak euro, which is likely to stay at this comparatively low rate in the near future, is making Germany more attractive.

On the other hand, Mercedes is building its newest models in Eastern Europe and overseas. After it increased production in Tuscaloosa, Alabama, and built a new factory in Kecskemét, Hungary, the company now wants to start production in Mexico from 2018 onwards.

Like BMW and Audi, who are already producing in Mexico, Daimler can start shipping its cars to Europe toll-free.

 

Markus Fasse currently specializes in aviation and automobile industry news. He has been an editor at Handelsblatt since 2000, and a correspondent in Munich since 2005. To contact the author: [email protected]