Photo: Daimler AG
With increased sales, production and most of all an expanded and highly successful model lineup, the three-pointed star car manufacturer from Stuttgart has been on a roll in the last couple of years or so, but things aren't as chirpy as you have imagined from a profitability point of view, especially when being compared with its arch rivals from Munich and Ingolstadt.
To put things into perspective, the earnings before interest and tax at Mercedes-Benz together with smart were 6.2 percent of sales for 2013, well behind BMW's 9.4 percent and Audi's margin of 10.1 percent, both of which also managed to sell more cars than Mercedes-Benz.
One of the major problems seems to be the overspending when it comes to production on home turf, hence the recent expansion of production sites all over the world, including China.
“Our efficiency measures are having an impact across all divisions and we will structurally safeguard and expand these measures.” Dieter Zetsche had told Daimler's shareholders at the annual meeting back in April.
As the Stuttgart company was already on its way to cut costs by around four billion Euros (approximately $5.4 billion) in the last couple of years, it seems that by the end of 2014 it targets for annual savings of no less than two billion Euros ($2.7 billion) at Mercedes-Benz and smart and 1.6 billion Euros ($2.2 billion) at Daimler Trucks.
While that seem like a drastic amount of money from three businesses that also need to receive investments in order to launch new models and research new technologies, keep in mind that the cost cuts are necessary in order to improve profitability on the wave of increasing sales. Also, the massive r&d budget at Mercedes-Benz – arguably the largest in the business – will remain untouched by the cuts.
One of the major problems seems to be the overspending when it comes to production on home turf, hence the recent expansion of production sites all over the world, including China.
“Our efficiency measures are having an impact across all divisions and we will structurally safeguard and expand these measures.” Dieter Zetsche had told Daimler's shareholders at the annual meeting back in April.
As the Stuttgart company was already on its way to cut costs by around four billion Euros (approximately $5.4 billion) in the last couple of years, it seems that by the end of 2014 it targets for annual savings of no less than two billion Euros ($2.7 billion) at Mercedes-Benz and smart and 1.6 billion Euros ($2.2 billion) at Daimler Trucks.
While that seem like a drastic amount of money from three businesses that also need to receive investments in order to launch new models and research new technologies, keep in mind that the cost cuts are necessary in order to improve profitability on the wave of increasing sales. Also, the massive r&d budget at Mercedes-Benz – arguably the largest in the business – will remain untouched by the cuts.
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