Daimler eyes material savings to offset high variable costs

Article by Christian A., on March 1, 2015

Daimler AG wants to gain substantial cost savings to offset higher costs for technology to cut carbon dioxide emissions, for at least the next few years, according to Chief Financial Officer Bodo Uebber.

Larger carmakers have invested large amounts of money for development of fuel-efficient vehicles, but consumers are now being prompted by lower fuel prices to instead purchase larger, less-efficient models.

Ford Motor Co. has already warned its investors that consumers in the United States may not pay the full costs of technology to cut greenhouse gas emissions – mainly because gasoline is cheaper than before.

Uebber remarked that in 2014, Daimler could offset these costs with material cost efficiencies, adding that the carmaker could do the same for the next three years.

Early February, Daimler chief executive Dieter Zetsche said that its Next Stage program would allow the carmaker to cut costs enough to help Mercedes-Benz post a 10-percent margin target in the midterm while offsetting the surge in structural cost brought by EUR11.2 billion in plant and equipment investment for 2015 and 2016.

To achieve that, Daimler could seek more commonality among its different car lines, which should enable the carmaker to negotiate higher volume with fewer suppliers. Uebber remarked that such action would give the carmaker leverage as well as possibilities to cut its material cost base.

In January 2015, Mercedes sold 15 percent more vehicles in Europe that in the same month. Uebber quipped that while he was cautiously optimistic about rebounding market growth in Europe, the sales results in January were not a confirmation.

"If it goes further in the next five months, I'm happy, and maybe the low fuel price will support it," he said. Uebber noted that while sales in the United States have already topped 2008 levels, volume in Europe remains at around 15 percent lower.

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