By on June 9, 2013

Mercedes_CLA - Picture courtesy motorvision.de

“Struggling to match rivals’ scale and efficiency in smaller cars, as well as their success in China, Stuttgart-based Daimler has fallen further behind German peers BMW and Volkswagen,” reports Reuters.  Alone by bringing outsourced SAP systems in-house, Daimler wants to save €150 million (nearly $200 million.)

A lot of the work will be done in new Daimler IT centers in India and Turkey.

This is part of a huge austerity program that aims at cutting annual costs by 2 billion euros for the Mercedes-Benz division by the end of 2014. The bulk of the savings must be achieved this year.

Where will the other €1,850 million be saved? Ominously, German Focus Magazin reports that Mercedes-Benz plants in Germany are less efficient than plants elsewhere.

Get the latest TTAC e-Newsletter!

17 Comments on “Daimler Must Save At All Costs...”


  • avatar

    The CLA is gonna be a huge sales success, but it’s a shame Mercedes Benz is turning out such cheap cars now. they don’t even give you real leather unless you spend outrageously.

    Their new interiors feel like they’re designed to wipe off with a rag and some windex – to re-lease to the next turkey.

    The new S550 looks like something Hyundai already made.

    • 0 avatar
      krhodes1

      Mercedes has always made you pay for leather. And hose out interiors ARE their heritage, ever been in a w123? I’d like to see them go back to that high-quality simplicity, but I also realize that no one would actually buy a car like that anymore.

  • avatar
    areader

    So they’re insourcing IT stuff to save money. Same as GM. I thought IT is outsourced to save money. Maybe the real reason is that various levels of management just don’t want to do their jobs.

    • 0 avatar
      graham

      Outsourcing at large organizations is more often used for more effective cash management then outright cost reduction. The substantial one-time costs associated with major system development and implementations can be distributed over multi-year contracts when outsourcing…basically the same idea as financing the project costs without having to manage all the nitty gritty details.

    • 0 avatar
      Chicago Dude

      It’s really hard to make outsourced IT work well enough to save money. You have to understand that the great workers in all of the low-cost countries work for multinationals, they don’t work for the outsourcing companies. Thus, you have the lower-tier workers and lower-tier wages – and very high employee turnover – the moment a better paying position opens, the worker will abandon everything he has done for you and you will only find out when his replacement emails you to ask how to do something very basic.

      Daimler is going to operate their own IT centers in India and Turkey. This means that they will pay more for the people but they will also get better workers and those workers will view their job as a career.

      • 0 avatar

        +1.From my experience of outsourcing work to India – in one project we spent $300K on Indian outsourcing company plus trips to India and back plus frustration and as a result we got substandard code that did not work as expected. Eventually we hired the local contractor for a third of price who developed the code of a magnitude of order higher quality in quarter of time without drama and management expenses. Another example is our development center in India – turnover is high, new people have no clue about technology, quality of code is dismal. But management thinks we are saving money. Probably they know better – they have MBAs after all.

        • 0 avatar
          WaftableTorque

          That reminds me of when I was an IT contractor for an engineering firm and was speaking to a project manager about the quality of engineers in China and India. Their local schools churn out students with shoddy and sloppy work as compared to North American students. That meant most of the professional engineers were busy correcting the defects and poor calculations their new recruits were churning out.

          What really riled him was when he would send them the work back asking for corrections to be made, and they would erase his comments and send them back with no other modifications. I could hear his veins popping just talking about it.

  • avatar
    dusterdude

    If they are looking to cut costs…they need to “reduce headcount”…

    Look at the total # of employees, well over 250,000 globally..

  • avatar

    They have nobody to blame but themselves. They had opportunity with Chrysler and screwed it up churning out substandard cars. With their level of arrogance towards partners it is unlikely they will be able to make mainstream cars unless they turn Mercedes into mainstream brand. VW and BMW are shrewd in their acquisitions and handling mainstream brands.

    • 0 avatar
      jimbob457

      Good observation. Also, quality problems – unthinkable before the 1990’s. Is the world’s oldest car maker sliding down the long path to eventual oblivion?

  • avatar
    wmba

    Well, does Mercedes have to have eleventy million models? They’re as bad as BMW. AMG everything and an E class “coupe” that’s half a C or is it the other way around? Who knows, who cares – the alphabet soup is worse than Lincoln.

    Rationalize.

  • avatar
    hreardon

    Long term, Mercedes and BMW are facing some major obstacles that lead me to believe that they will eventually cease to be independent entities. It’s said that Volkswagen spent over $60 billion (with a “b”) developing and rolling out their new MQB architecture. That’s some serious bucks and you can be sure they’re expecting some significant payback on that investment. They’re pouring insane money into alternative powertrain options ranging from Audi e-gas to hybrids and all electrics. Major engine overhaul programs (Gen 3 EA888 TFSI powerplants and EA 222 TDI powerplants) and substantial investments in manufacturing and metallurgy.

    My point is that in order to keep up, Daimler and BMW are going to have to have access to that kind of investment capital and have the volume over which to amortize the costs. It’s going to become increasingly difficult for them, along with our friends at FIAT, Alfa, etc.

    • 0 avatar

      Are Big Three better financially than Daimler and BMW? My impression was that Daimler and BMW are making tons of money compared to GM and Ford. Of course in the end they all will be owned by Chinese – it seems like thats the fate of all Western manufacturers.

    • 0 avatar
      TonyJZX

      havent Mercedes announced they are sharing tech with Nissan

      BMW with Toyota?

      whether this amounts to anything is another matter

  • avatar
    SixDucks

    Chrysler was an opportunity, no question. Of course it needed a lot of effort, but Daimler would have been better off had they made it work. Keep in mind if things go badly Daimler still has many valuable assets that could be sold off, like their commercial vehicle operations for instance.

    • 0 avatar
      Compaq Deskpro

      If Daimler got it right, they would be rolling in dough from the LX cars, trucks and Jeeps. And the CLA, while a crappy Mercedes, could be an excellant Dodge Stratus.

Read all comments

Recent Comments

  • SaulTigh: Frankly, the internet raised them and that’s the problem.
  • SCE to AUX: “information asymmetry and legal monopoly status” Disagree. The internet has wiped out...
  • Lou_BC: @jkross22 – basically true. Go in preparing and be ready to walk away. The reason why dealerships want...
  • Lou_BC: @EBFLEX – you want a link? https://gmauthority.com/blog/2 022/01/general-motors-hit-w...
  • Lou_BC: “When you’re paying MSRP, all that’s left is the paperwork.” The nice part about getting a vehicle before...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Jo Borras
  • Mark Baruth
  • Ronnie Schreiber