Mercedes-Benz: top management revolution and maxi cuts to weather the crisis

The Mercedes-Benz is going through a phase of profound transformation, marked by significant changes at the top management level and new strategies aimed at coping with an unprecedented crisis that is affecting the entire European and North American automotive industry. CEO Ola Källenius, under pressure from the disappointing results of the current year, announced a management reorganisation with the aim of stabilising the company and revitalising its competitiveness.

Among the main changes, Hubertus Troska, responsible for operations in China, will retire in July 2025, making way for Oliver Thöne, current head of product strategy. China is the Achilles heel of the group's accounts. Britta Seeger, now head of sales and marketing, will instead lead the human resources department, succeeding Sabine Kohleisen, who will leave the company in April. Mathias Geisen, currently head of the Van division, will take the helm of sales and marketing, while Olaf Schick, cfo of Continental, will rejoin Mercedes-Benz from 1 October 2025 to take charge of integrity, governance and sustainability, succeeding Renata Jungo Brüngger. A surprise, Schick's move. In a note, Continental explained that Schick, who joined the executive board in May 2023 and has been group cfo since July, will complete the planned spin-off of Continental's automotive business and leave the post at the end of September 2025. The group's Supervisory Board will give formal approval to the early exit requested by the manager at its meeting on 18 December and will choose a successor in due course.

These changes in top management at Mercedes-Benz come at a delicate time for the Stuttgart-based giant, which reported financial results below expectations in 2024, with sales of electric cars in China plummeting 31% in the third quarter, and an overall drop of 13%. Also in the third quarter, operating profit fell to EUR 2.5 billion, a year-on-year drop of 50%, with the operating margin reduced to 4.7%, far from the 14% promised by Källenius when he took office. For the full year, a margin of between 7.5% and 8.5% is estimated. Meanwhile, capitalisation has plummeted below EUR 60 billion, compared to more than EUR 80 billion in spring 2023. Minus 11% losses on the stock exchange this year. Further up in the ranking, before the leader Tesla, there are three eastern manufacturers: Toyota and the Chinese Byd (100 billion) and Xiaomi (91 billion after debuting its first model).

In order to react to the crisis, Mercedes-Benz, according to athree-week-old anticipation and as reported today in the online edition of Manager Magazin (a magazine of the same group that publishes the well-known German weekly Der Spiegel), intends to implement a 5 billion euro cutback plan (by 2027), following the example of Volkswagen, which in recent weeks has been negotiating with the trade unions on a rescue operation that has no precedent in its 87-year history. Among the most talked-about hypotheses for the house of the three-pointed star is a reduction in labour costs by up to 10%, with speculation of even more drastic measures of up to 25%. Although the company is talking about costs, not directly about redundancies.

The difficulties of the Stuttgart-based group, protagonist of adouble profit warning a few weeks ago, reflect the reality of an increasingly competitive global market. In China, local brands such as Byd are winning thanks to the growing demand for electric vehicles that are highly advanced in terms of technology and very competitive in terms of price, while in Europe, sales of electric cars have been floating for the past two years, averaging around 13-14% market share for new registrations. Adding to the picture of weak demand (motivated by prices that are still too high) are the energy and labour costs, which continue to burden German manufacturers' budgets.