German multinational automotive company, Daimler, is planning to shrink its workforce so that it is able to reduce costs. Last year, the Company had planned to cut about 10,000 jobs globally in order to improve profit margins. Its significant investments in future technologies, including electric cars and self-driving software has been affecting profits. Therefore, it is now expected to reduce its workforce by 3.3 per cent, in two years’ time. The move will lower costs by about $1.5 billion.
Cutting costs across all operations will make cash available for investment in new technologies. Daimler has also divided its car, commercial-truck and mobility-services operations into three separate legal entities for efficient and cost-effective management.
Presently, the Company has a workforce of more than three lakhs worldwide, and it intends to carry out the job cuts in a very socially responsible manner, as was stated in November.
Not long ago, investors had been warned that returns will not be up to the mark for about two years. A very weak target of a minimum of four per cent operating return on sales has been set for this year at the Mercedes-Benz car unit. This is way below what the competitors made last year.
Given the slump in global sales and the growing demand for environment-friendly cars worldwide, it is not surprising that the Company wishes to focus on producing electric vehicles.
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