DBRS Comments on DaimlerChrysler Group of Companies
Dominion Bond Rating Service (“DBRS”) notes that DaimlerChrysler AG, (“DaimlerChrysler” or the “Company”), has today announced a program to further integrate its functions and streamline its core processes to reduce redundancies, remove management layers, and speed up decision making. The Company expects to take three years to implement the program, which would lead to a headcount reduction of 6,000 globally (about 20% of general and administrative staff and 30% of managerial personnel), costing about €2 billion over a three-year period. Together with other ongoing efficiency programs, the Company targets a reduction in general and administration costs of about €1.5 billion per year. (The net effect of today’s announcement will be €1 billion per year when the program is completed.)
DBRS deems the actions taken by the Company, although positive to maintaining its long-term profitability, to be neutral to the Company’s current ratings. Moreover, DBRS expects the Company to continue to maintain strong liquidity as its operating performance remains on track. The Company should have no problems funding the program and its operating needs.
DBRS also notes that the program aims to standardize the most important processes within and across divisions and reduce the cost of administrative functions at the Company.
The key initiatives of the program include:
(1) The consolidation of all the general and administration functions as a central function to allow the business divisions to focus on development, production and sales;
(2) Increasing cooperation between the Mercedes Car Group and the Chrysler Group;
(3) Creating a new Truck Group focusing only on commercial trucks to increase synergies among regional truck units and brands; and
(4) Reporting the Bus and Van businesses under a new segment – Van, Bus, Others.
A successful implementation of the program will improve the efficiency of the operations and enhance the competitiveness of the Company.
DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com.