Mercedes-Benz announces layoffs, salary cut amid cost-cutting drive

Luxury automaker Mercedes-Benz has announced job cuts and, a reduction in salaries to improve earnings following the decline in sales in 2024. Recently, the German automaker reversed its plan, manufacturing more petrol and diesel cars than electric vehicles, to revive margins.

According to a report by the Reuters news agency, Mercedes-Benz has won the agreement from its work council to offer buyout to employees and halve the planned salary.

In a cost-cutting drive, the car manufacturer has not specified how many employees would be slashed but the workers involved in car production will remain unaffected. The management has agreed to extend the job security guarantee until the end of 2034.

Last month, the German carmaker announced the unveiling of 19 new combustion engine models and 19 BEVs by the end of 2027, foolwoing a 25 percent collapse in EV sales in 2024.

During the 2024 earnings, Mercedes-Benz's earnings slumped by 30 percent and its car division saw a decline of 40 percent. Chief Financial Officer Harald Wilhelm said the company will witness a fall in earnings this year too, but anticipated a rate of return of 6-8 percent in the car division in 2025.

Amid the challenges faced by the auto industry in the EU region, the carmaker will be localizing its production in China and the United States. In Europe, carmakers are facing several challenges as energy and labour costs have become uncompetitive. The German automaker said it will reduce the production cost by 10 percent within two years and double that by 2030. Though the company will not shut the German plant, it will shift the car production to Hungary where costs are 70 percent lower.

Mercedes will also outsource finance and human resources to procurement in a cost-saving measure.