Daimler to cut production at Sindelfingen plant, says sources

Article by Anita Panait, on September 25, 2012

Daimler will slash production at its Sindelfingen plant near Stuttgart, its largest car factory, a source privy with the matter told Reuters. The planned production cut comes as dwindling markets in Europe and China affected sales of the carmaker’s Mercedes-Benz vehicles. The source told Reuters that all production lines at the plant will be affected, as labor representatives and management are currently discussing shift plans.

After issuing a profit warning for its Mercedes-Benz unit last week, Daimler said it would implement a cost savings program. Sources told Reuters that this would cost a total of over EUR1 billion ($1.3 billion). The cost saving program, however, does not include job cuts.

German paper Stuttgarter Zeitung reported that relations at the plant over shifts for the fourth quarter have become so tense that Daimler was forced to call in mediators to settle the dispute. The paper, citing employee sources, reported that the S-Class sedan was doing especially badly. A spokesman for Daimler told Reuters that that the carmaker is looking at demand and will adjust its output to keep stocks at the optimum level.

The spokesman said that Daimler planned to increase employee numbers at the plant by 250 people by 2014. Daimler chief executive Dieter Zetsche commented that the carmaker was gearing up for a "challenging environment" in Europe and China. He also raised concerns among investors in rivals BMW and Volkswagen.

It should be noted that China is a major source of profits for German luxury carmakers. Their solid performance in the Asian country has helped them stave off profit problems that are currently hounding volume carmakers in Europe. Mercedes, however, is more affected by the dwindling demand for cars in China than its rivals, which the Daimler CEO has partly blamed on their local sales organization.

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