Daimler closes its factories for another two weeks

Munich, Frankfurt The corona virus has done what has not happened in the wake of the financial crisis, the diesel scandal or a natural disaster: the work in the German automobile plants is almost completely idle. BMW, Daimler, VW, Opel or ford had kept the tapes going even after the collapse of the capital markets following the bankruptcy of the investment bank Lehman Brothers in 2008. The factories have been quiet since the beginning of this week.

And this calm should last longer than originally thought. In any case, Daimler extended the closing times for its European plants by another two weeks on Thursday. The world’s largest manufacturer of premium cars and trucks will now stop production by April 17th. “That became necessary because at the moment there is no demand,” said Daimler works council chief Michael Brecht to the Handelsblatt.

The Swabians are not alone in their decision. In parallel to Daimler, the confirmed on Thursday PSASubsidiary Opel to send thousands of employees on short-time work. The employees in the plants in Rüsselsheim, Kaiserslautern and Eisenach should “precautionarily” shorten their working hours for half a year.

“However, we very much hope to be able to end this earlier,” said a company spokesman. Volkswagen had previously announced that it would send around 80,000 employees on vacation in Germany.

In total, more than 200,000 employees in Germany’s largest industry have to adjust to lower wages. Even in the worst case, for example, Daimler employees would still receive 80 percent of their net wages during the short-time working phase. However, the burdens should not be passed on to the employees alone.

Debate about bonuses

“We now also need to have a quick discussion about a contribution from managers,” said Daimler works council member Brecht. Corresponding thoughts are also stirring at VW. The bonus payments for the executives of the multi-brand group add up to around one billion euros, according to circles in the company.

It is less likely that the dividend for the past year could be cut. “With this, we could protect the liquidity of our group,” said a board member of a large manufacturer who wanted to remain anonymous. However, the pressure on share prices would increase even further.

The slump on the stock markets is already causing wild speculation about a possible takeover of Daimler by the major Chinese shareholders BAIC and GeelyFounder Li Shufu. Financial experts consider such a takeover to be very unlikely. But Brecht emphasized: “Our stock market price is a bargain, so we will have to be vigilant.”

Daimler’s top employee representative also warns elsewhere: “There is life after Corona. We have to prepare for that. ”For example, Mercedes engineers are still tinkering with the completion of the new S-Class despite production being stopped. The flagship of the brand with the star should roll off the assembly line at the end of the year.

Brecht fears that the shutdown of German automobile production could continue beyond mid-April. “We will have to see how the overall situation and thus the demand develop.” No one can realistically answer the question of how long the work in the factories has to be idle today.

From his point of view, it is clear that production should start rather slowly after the abrupt stop. “We won’t be able to walk at full load,” said Brecht. Alone due to the stricter hygiene measures, the work on the conveyor would have to be rectified. He also expects bottlenecks at the suppliers. “It’s like after a full closure on the highway. If this is lifted, the traffic will only gradually roll in after the traffic jam. “

In Italy and Spain in particular, the two European countries that are particularly struggling to curb the pandemic, production has stood still for an indefinite period. Like VW and other manufacturers, Daimler relies on supplies from these two countries. The company ranks said that alternatives are currently being sought to compensate for the failures.

Hope for China

It is even more important for the automotive industry that demand picks up again quickly. Currently, Europeans and Americans have other concerns than worrying about buying a new car. The companies have not yet announced specific sales figures. However, when the factories in China had to close due to the corona virus in early February, demand had fallen by over 80 percent. It is unlikely to look any better in Europe and the USA.

In the meantime, China is seen by many in industry as a blueprint for further development. Daimler boss Ola Källenius, for example, now sees business in the Far East almost returning to normal after the severe slump. The Mercedes factories in Beijing should be able to produce at full capacity again in a few weeks, Källenius said in an interview in the Handelsblatt earlier this week: “Every day, more people come to the dealerships. Demand is picking up. ”

Handelsblatt Morning Briefing - Corona Spezial

But skepticism is appropriate. Andreas Radics, partner at Berylls Strategy Advisors, expects global car sales to shrink by about ten percent this year. However, it is still too early to precisely quantify the impact of the pandemic on the auto industry, the industry expert warns. “But I assume that we have only seen a fraction of the faults so far.

Not least because consumer behavior will change in the medium term, ”says Radics. “Only manufacturers who can quickly develop a new strategy for production, trade and model portfolio and thus react flexibly to the crisis will get away with a black eye.”

After all, Daimler used the time when the factories in China were already at a standstill to pre-produce its S-Class luxury model in Europe, according to corporate circles. These stocks would now be shipped to Asia to meet the increasing demand there.

The group builds its luxury limousine exclusively in its factory in Sindelfingen, which is now also being decommissioned. With the export of the S-Class, Daimler is now getting at least some money in the till. Securing liquidity is a top priority. “Cash is king,” said a board member.

More: Daimler works council chief Michael Brecht: “I expect bottlenecks at the suppliers”

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