| 10:35 AM EST

Daimler to Cut Mercedes Management by 10%

Daimler AG’s Mercedes-Benz Cars unit aims to reduce its managerial ranks by 10% over three years, lowering its annual costs by $1.1 billion.
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Daimler AG’s Mercedes-Benz Cars unit will reduce its managerial ranks by 10% over three years, lowering its annual costs by more than €1 billion (€1.1 billion).

CEO Ola Kallenius (pictured) tells analysts the move is among several to address higher-than-expected costs related to electrification and other measures to meet tightening carbon dioxide emission standards in the European Union.

Mercedes spending on plants, equipment and product development will be capped at 2019 levels and slowly reduced over several years. Van operations will target savings of €100 million ($110 million) on the cost of personnel and material.

Daimler’s commercial truck unit will be expected to cut its personnel costs by €300 million ($330 million) by the end of 2022. Operations in Europe will target an additional €250 million reduction in variable costs.

Mercedes aims to add 20 hybrid or all-electric Mercedes models by 2022. Kallenius says the success of those vehicles will be critical to the company’s effort to satisfy the EU’s CO2 requirements.

Despite the cost cutting, Daimler’s earnings will continue to feel the cost pressure through 2021, Kallenius cautions. He says the company’s Mercedes and light van businesses now anticipate a slim profit margin of 3%-5% this year, rising to 4% in 2020 and 6% by 2022.

The company’s commercial truck and bus unit aim for operating margins of 5% in 2020 and at least 7% in 2022. Kallenius says the division’s sales operations in Europe, Latin America and Japan. The unit’s product lineup in Brazil will be simplified.

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