Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, September 18, 1993 TAG: 9309180036
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: BONN, GERMANY LENGTH: Medium
Daimler executives promised to eliminate 40,000 jobs - 20 percent of the automaker's staff - by the end of 1994 to cut costs. The company, which has several Southeastern states including Virginia competing to land a new recreational-vehicle assembly plant for its Mercedes-Benz division, predicted it would reach a financial low point in the third quarter.
Chairman Edzard Reuter said the company planned to cut costs totaling $4.9 billion by 1997.
"There is no room for protected species and taboos if production locations in Germany are to remain competitive," Reuter said.
The European auto industry is in its worst slump since World War II. German automakers' sales have fallen 18 percent this year, because of recession and growing competition from less expensive Japanese models.
Daimler's announcement at a news conference in Stuttgart was the first time a German company had ever disclosed financial results calculated under U.S. Securities and Exchange Commission accounting guidelines.
The accounting practice was required by the NYSE, where Daimler's common stock will be listed starting Oct. 5.
Under conventional German accounting, however, the company reported a net profit of $102 million. German companies are permitted to dip into reserves to bolster net results with nonoperating income. That practiceisn't allowed under U.S. accounting rules.
Deutsche Bank, the powerful German bank that holds 28.2 percent of Daimler's stock, announced it may offer some of its shares to U.S. investors. But some analysts were skeptical about Daimler-Benz's ability to attract investors on the New York exchange.
German autoworkers cost their firms 40 percent more on average than their American counterparts, and the big German corporations like Daimler have been criticized as being top-heavy with executives.
"It's not only a problem of too many workers. Like too many of the big companies, they have too much fat in the administration," said Juergen Pieper, an analyst for Deutsche Bank.
But Pieper said Reuter's cost-cutting program has so far gone further than the one at Volkswagen, which hired Spanish savings expert Jose Ignacio Lopez de Arriortua in March.
Financially, Daimler will reach its "absolute low point" in the first nine months of 1993, said chief financial officer Gerhard Liener. He did not provide an estimate for losses in the third quarter.
Daimler-Benz grew rapidly during the 1980s by acquiring the electronics company AEG and creating the aerospace firm DASA.
Daimler's Mercedes-Benz motor division suffered a 16 percent sales drop relative to last year's first half. AEG sales declined 8 percent, and DASA's sales fell 10 percent.
by CNB