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Daimler Looks at Selling Dealerships in Push for Margins

Daimler AG (DAI), the maker of Mercedes-Benz vehicles, is considering scaling back its domestic retail organization and ending production of electric-car battery cells in a revived push to reach a profitability goal.

The third-biggest producer of luxury cars presented plans to sell 36 auto-sales outlets in Germany that employ 1,500 people, Daimler’s works council said in a statement today. The manufacturer is looking at shutting its Li-Tec battery-cell plant in Kamenz, Germany, by 2016 and shifting to an outside supplier, Manager Magazin reported separately, citing unidentified people at the Stuttgart-based carmaker.

Chief Executive Officer Dieter Zetsche has vowed to increase operating profit at the Mercedes-Benz automotive division to 10 percent of sales, exceeding margin targets of larger competitors Bayerische Motoren Werke AG and Audi AG. Zetsche has held off from setting a deadline for reaching the goal since scrapping an already delayed target date in 2012.

First-quarter earnings before interest and taxes at Mercedes amounted to 7 percent, less than margins of 9.9 percent at BMW, the biggest luxury carmaker, and 10.1 percent at the Ingolstadt, Germany-based Audi division of Volkswagen AG.

Airbus Disposal

Daimler is focusing on investments in automotive and truck businesses while disposing of assets outside those industries. The company got rid of its stake in planemaker Airbus Group NV last year, and agreed in March to sell its 50 percent holding in an engine joint venture to partner Rolls-Royce Holdings Plc.

The German automaker will probably use battery cells from LG Electronics Inc. (066570) instead of its own components once a new electric version of the Smart city car goes on the market in 2016, Hamburg-based Manager Magazin reported.

“We are working on the future positioning of Li-Tec,” Hendrik Sackmann, a Daimler spokesman, said in an e-mailed statement, reiterating comments from a year ago. “The battery business is growing rapidly, and everything is going according to plan at Li-Tec.”

Daimler’s retail employees are currently working under an agreement that preserves jobs until the end of 2017 and prevents the sale of its own dealerships until the end of 2015. Individual sites, which belong to a larger dealer, can be disposed under the agreement. The carmaker plans to consolidate its dealerships regionally and cut about 340 administrative jobs in the move, according to the works council.

Daimler employs about 15,000 people in the 33 dealerships, including 158 outlets, that it owns in Germany.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net Tom Lavell

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