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Daimler Aims To Reduce Operational Costs By More Than 20%

Daimler Aims To Reduce Operational Costs By More Than 20%
The German auto giant Daimler is aiming to conduct a complete overhaul of its Mercedes-Benz brand and to reposition it as a more upmarket and luxury brand.
The strategy adopted by the company to achieve this includes cutting of fixed costs, capital expenditure and expenditure in research and development by as much as 20 per cent of the levels of 2019 by the year 2025.
The company says that this will help Mercedes-Benz to be able to achieve a target of return on sales margin in double digits. For this purpose, the company also wants to double the sales of Maybach branded cars as well as to ramp up sales of AMG and G-Wagon derivatives of the Mercedes brand, Daimler said.
"We will pursue higher portfolio profitability, we will steer by contribution margin, we will move (the) existing portfolio margin up and move capital to luxury and high-end products," Chief Financial Officer Harald Wilhem said in a virtual presentation of the company's strategy.
The car maker said that even if the market conditions are unfavorable for it, it has set a target of achieving a return on sales within a mid to high single-digit range for Mercedes-Benz AG by 2025.
With the novel coronavirus pandemic resulting in a significant drop in sale, Daimler has already make significant cut in its operational expenditure as the German auto giant has been pushed to report operating losses for the the first and second quarters of eh current year.
Further, manufacturing of sedans in the United States has been stopped by Mercedes-Benz in order to counter losses and has instead focused more on those models and variants that are more profitable such as its SUVs. As a part of its turnaround strategy, the brand has also combined its fuel cell development with Volvo Trucks and has stopped an alliance with BMW for automated development of vehicles.

Christopher J. Mitchell

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