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DaimlerChrysler to Cut 8,500 Mercedes Jobs

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FRANKFURT, Germany - Automaker DaimlerChrysler AG said Wednesday it will cut 8,500 jobs in Germany at its Mercedes Car Group in a bid to return the troubled brand to profitability.

The company said the cuts will come through voluntary termination agreements over the next year and result in charges of 950 million euros ($1.11 billion).

DaimlerChrysler, the world's fifth-largest car maker, said the charges will be posted in the fourth quarter and aren't expected to hamper the company's outlook. The automaker had said previously that it expects to beat last's year operating profit of 5.8 billion euros ($7 billion).

The announcement came after Dieter Zetsche, who took control of Mercedes this month and is set to become chief executive of DaimlerChrysler at the beginning of 2006, outlined the plan to the company's supervisory board in the United States earlier in the day.

The Mercedes division was once the pride of the company, and industry watchers are keen to see if Zetsche can invigorate it the way he did Chrysler, which posted its eighth straight quarterly operating profit in July.

DaimlerChrysler shares closed up nearly 4 percent at 45.65 euros ($54.95) in Frankfurt trading. The company's U.S.-traded shares rose $2, or 3.8 percent, to close at $54.83 Wednesday on the New York Stock Exchange.

Finance director Bodo Uebber said in a conference call the company's supervisory board accepted the recommendations and approved the plan.

"The supervisory board has taken this into consideration and they agreed to make the necessary budget available," he said. "The works council, they agreed, they accepted this."

Under the initial outline, workers can volunteer to be phased out and will be given financial benefits, including job training and help in starting their own business, if needed, said Guenther Fleig, human resources director for the company's management board.

"This decision to reduce the number our employees hasn't come easy to us, but we have created the basis for profitable growth in the future," he said. "We are making a very fair offer to our employees, a very attractive offer."

The program will target workers at plants in Sindelfingen and Bremen, which produce the C-Class cars.

Works council spokesman Erich Klemm agreed that there was a surplus in the number of workers, but said no one would be forced to leave Mercedes under the terms of a deal signed in 2004. That agreement guarantees employment through 2011.

Fleig said the Mercedes unit had too many employees, adding that high costs for raw materials and currency fluctuations, along with intense competition, was making it hard to turn a profit.

"This needs to be adjusted. That is our aim, to improve the competition by improving productivity," he said.

But it will be a bitter pill for Germany, which is suffering from 11.6 percent unemployment and almost no growth.

Earlier this week, Volkswagen AG said it would reduce its work force in western Germany from the 103,000 currently employed, offering early retirement packages and severance in the hope that employees would leave voluntarily. VW did not say how many jobs it was seeking to cut.

GM announced plans last year to cut as many as 10,000 jobs at Adam Opel in Germany. GM Chairman and CEO Rick Wagoner said this month at the Frankfurt auto show that the company is about halfway through that plan.

The Mercedes group, which includes the flagship Mercedes-Benz models as well as the Smart mini-car and luxury Maybach, employs 106,300 workers, about 94,000 of them in Germany.

The unit has struggled this year, facing a 1.3-million car recall amid quality problems and owner dissatisfaction. In April, DaimlerChrysler announced a 1.2 billion euro ($1.44 billion) restructuring of Smart that led to nearly 600 job cuts.

In July, the Mercedes group posted a scant operating profit of 12 million Euros ($14 million) for the second quarter, a 98 percent drop from 703 million euros in the same quarter last year.

Analysts cheered Zetsche's decision to oversee Mercedes. Three months after he arrived at Chrysler in 2000, Zetsche announced a plan to eliminate 26,000 white-collar jobs and shut down six plants over three years.

The ride was bumpy at first, and Chrysler reported $1 billion in losses in the second quarter of 2003. But by late that year, Zetsche said the recovery was well under way, and that Chrysler had trimmed 30,000 jobs and lowered material costs by 15 percent.

Chrysler is now in the midst of an aggressive plan to launch 25 new or redesigned vehicles by the end of 2006. The division's U.S. sales rose 8 percent in the first eight months of this year on the strength of such popular models as the Chrysler 300 sedan and the Chrysler Town & Country minivan.

David Healy, an auto analyst with Burnham Securities, said Mercedes has already begun showing signs of recovery, in part because it has cut its warranty costs. But the layoffs should speed that process.

"Dieter Zetsche is applying some of the techniques he used at Chrysler," Healy. "His fresh approach to the income statement and the cost levels and his U.S. experience is what's behind all this."

Source: http://www.cheboygannews.com/articles/2005...s/d8ctljj00.txt

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