Improvements yield €7.1 billion gain for DaimlerChrysler''s Mercedes unit
26 September 2007
The Mercedes Car Group, the passenger car division of DaimlerChrysler, is on schedule to raise productivity by a little over 7 per cent in 2007 and to improve its operating margin to 8 per cent, according to the division''s chief operating officer, Rainer Schmückle. The division has reported to have earned a return on sales of 8.2 per cent in the first half of 2007.
Schmückle, speaking to the press on 25 September, attributed this improvement to the division''s ''costs down, revenue up, execution'', or CORE, programme, which was launched in February 2005 and is now about to be completed on 30 September, ahead of time. The programme was originally expected to be completed on 31 December 2007.
Rainer E. Schmückle,
chief operating officer,
Mercedes Car Group
The objective of CORE was to improve Mercedes-Benz''s competitiveness along the entire value chain and to achieve a return on sales of at least 7 cent by 2007. Schmückle, who has been responsible for production, quality and purchasing and director of the CORE program, says almost all the planned measures have been implemented and the few remaining ones transferred to the line organisation.
The programme involved the implementation of more than 43,000 measures to enhance the Mercedes Car Group''s competitiveness in a sustainable manner. These efforts led to savings and revenue improvements of €7.1 billion (about $10 billion) in 2007 over 2004. A further €500 million of savings in material costs are expected by 2010. Despite increased expenditures for alternative and more efficient power train systems, the division aims to boost return on sales to 10 per cent by 2010 at the latest.
Schmückle believes that productivity improvements will largely compensate for the additional annual costs incurred on developing fuel-efficient vehicles. In 2006 productivity improved 12 per cent and in the current year it is expected to improve around 7 per cent. The division plans to improve productivity by a further 10 per cent totally in 2008 and 2009.
CORE was geared not only to cut costs and boosting efficiency, but also to improve quality, expand revenues and step up returns. It was also designed to create an organisational culture focused on execution "in order to generate outstanding products and services that fascinate and excite customers".