By Jack Kelly, Forbes Senior Contributor
Automaker Daimler AG, parent company of Mercedes-Benz, announced it will slash 10,000 jobs as the company rapidly pivots from traditional combustion engines to electric cars.
The job cuts are part of a corporate initiative to comply with strict EU regulations by cutting carbon dioxide emissions and transitioning over to aggressively producing more electric and hybrid vehicles.
The company has an international workforce of about 300,000 people working at factories in 17 countries. Wilfried Porth, who is a member of the board of management of Daimler AG, human resources and director of labor relations at Mercedes-Benz said, “With the cornerstones for streamlining the company, now agreed with the works council, we can achieve this goal by the end of 2022.” The German labor force has a large say in these matters and Porth promised that the company “will make the measures as socially responsible as possible.”
Daimler will offer the possibilities of part-time retirement, won’t fill many open headcount positions, offer severance packages and rely upon attrition to scale back its workforce. A large part of the layoffs will target managerial roles. Workers on the assembly line will not be subjected to the job cuts. A prior agreement between the company and its factory workers guarantees their employment up until the end of 2029.
The company cites other geopolitical and economic reasons for the job cuts as well. According to Daimler, the slowing global economy, concerns over Brexit and worries about the ramifications of trade and tariff wars between the United States and China has hurt its business and could be a further drag on revenues and profits. Daimler plans to cut labor costs by roughly $1.5 billion. Volkswagen’s Audi announced that it would cut 9,500 of its 61,000 jobs in Germany for similar reasons.
It’s not just German car companies that are confronting these challenges. An underlying issue during the recent General Motors (GM) factory workers strike in the U.S. was electric cars. The success of Tesla in the U.S. and growing consumer interest in electric cars have forced automakers to add these vehicles to their lineup.
Electric cars are built differently than vehicles with combustion engines. They have less parts, which means fewer assembly line workers are required. Electric vehicles’ parts are said to be easier to put into cars using robotics. In light of these factors, the United Auto Workers union estimated that the transition to electric vehicles could result in the loss of 35,000 of its members’ jobs.
GM offered a package to its assembly-line workers to settle the strike, but did not engage in job cuts similar to Daimler and Audi. Given the global trend, job losses for workers in GM auto plants seem inevitable.
Substantial investments in electric and self-driving vehicles will significantly hurt profits for automakers. They will need to cut costs—including downsizing many workers. Stefan Bratzel, director of the Center of Automotive Management, claims that about 150,000 jobs might be at risk.
While electric vehicles may help save the environment, the move will unfortunately and irrevocably impact large amounts of workers who will lose their jobs in the automobile manufacturing sector.