Mercedes-Benz experiences a substantial decrease in earnings, exceeding half of the original figure.
In a bid to boost profitability and resilience in the face of challenging economic conditions, Daimler has announced a series of cost-cutting measures and strategic shifts. The German automotive giant expects a significant decrease in group revenue for the current fiscal year, with sales expected to be significantly lower.
To address this, Daimler's board of directors announced a cost-cutting program in February, aiming to reduce production costs by 10% by 2027. This program includes a severance program for employees in indirect areas, affecting around 5,000 jobs in Germany through attrition, early retirement, and severance agreements.
The cost-cutting measures focus heavily on Daimler's “Cost Down Europe” program, which aims to eliminate more than €1 billion ($1.08 billion) in expenses by 2030. This will be achieved through workforce reductions, process streamlining, and relocating production to lower-cost countries, primarily in Germany.
In addition to cost cuts, Daimler is also realigning its supply chain, procurement, and supplier contracts. This overhaul poses challenges for European manufacturing partners. The company is also scaling back investments in zero-emission vehicle (ZEV) technologies in North America, postponing hydrogen fuel cell development in Europe to the early 2030s, and taking a more pragmatic, flexible approach to electric truck production, including considering outsourcing.
Daimler's financial goals are ambitious. The company's “Stronger 2030” strategy aims to boost profitability and resilience with a target of achieving a 12%+ industrial margin across all business units by 2030. To achieve this, Daimler plans disciplined investments, efficiency improvements, and growth in selected markets like North America and India. To maintain capital discipline, Daimler announced a €2 billion ($2.16 billion) share buyback program starting in late 2025 and a dividend payout ratio of 40–60%.
In summary, Daimler's cost-cutting measures aim to increase profitability, market resilience, and operational efficiency in an unpredictable external environment marked by energy fluctuations and regulatory change. The company's strategic shifts in production, supply chain, and zero-emission technology investments reflect a pragmatic approach to navigating these challenges.
Daimler's cost-cutting program, aiming to reduce production costs by 10% by 2027, extends beyond the automotive sector, also impacting finance, transportation, and industry, as the company considers outsourcing and relocating production to lower-cost countries. To achieve its ambitious financial goals under the "Stronger 2030" strategy, Daimler plans to make disciplined investments, improve efficiency, and grow in selected markets like North America and India, while maintaining capital discipline through a €2 billion share buyback program starting in late 2025 and a dividend payout ratio of 40–60%.
