BMW has always been a leader in the automaker – but this year they received some major competition from their rival Mercedes-Benz. In order to keep up with sales and to stay where they need to be they are forced to cut a large amount of jobs – which is something they have never had to do.
The German carmaker is likely to cut 8,000 jobs, but yesterday would only say it was likely to cut thousands of them, starting next year. Executives said the majority would fall in Germany, where about 75 per cent of its 107,000-strong workforce is based. The cuts would include several thousand full-time employees as well as temporary workers via early retirement, buy-outs or natural attrition.
The fact that BMW has not resorted to large cuts before highlights the pressure it is under from shareholders to catch up with Mercedes, owned by Daimler. BMW’s return on sales was just 5.4 per cent in the third quarter in its motor business against 9.5 per cent at Mercedes, even though BMW is expected to report record profits this year.
Mercedes has escaped from the shadow of Chrysler, which Daimler sold this year, as a series of job cuts and management changes have resuscitated the brand after a loss in 2005. “When we see where Mercedes is today, the question for the management is simply: ‘Why are we not there too?’,” said one BMW director.
BMW has most of its production in high-cost Germany but its sales are increasing most rapidly in areas such as Asia and the Middle East. As Germany will bear the brunt of the cuts, BMW’s operations in the US and China are likely to be strengthened. “This is about globalisation and where the demand and production in the future will be,” said one BMW executive.
IG Metall, the engineering union, said the cuts were “totally normal” as they were mostly in connection with temporary workers and it endorsed management’s plans to boost profitability. BMW also stressed that it would fully consult its powerful works council. Ernst Baumann, the management board member for personnel, said: “We will do this the BMW way; that is, amicably with the workers.”
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