Global Car Companies Big Layoffs: Toward Electric Transformation

A number of multinational car companies use a "layoff list" to end the upcoming 2019 year painting.

In the past two weeks, only the two largest German car giants Daimler and Audi announced the total number of redundancies to be close to 20 thousand.

In November 26th, Audi issued a statement that it would lay off 9500 people by 2025, accounting for about 10% of the total workforce. This will save Audi 6 billion euros in the next ten years, so as to support enterprises to accelerate the transformation to electrification and digitalization.

Three days later, in November 29th, Daimler officially announced that it plans to lay off at least 10000 people worldwide by the end of 2022. The layoff size will account for at least 3.3% of the world's employees. The company hopes to save about 1 billion 400 million euros of funds through layoffs to fill up the cost of car electrification and bring about a decline in profits due to weak market sales.

Although there were no specific layoffs, BMW also said in November 27th that it would strive to save about 12000000000 euros (US $13 billion 230 million) before 2022 to meet the cost of electrification and automatic driving technology. Under the agreement, BMW will slash bonuses and extend the hours of work for some employees, which will take effect from 2020.

Affected by unfavorable factors such as car market downturn, trade war and Britain's departure from Europe, a new wave of global layoffs has spread to Daimler, Ford, general motors, Honda, Jaguar Land Rover, Nissan, Volkswagen and other mainstream multinational car companies.

In fact, the wave of global car companies' layoffs started early in late 2018. In November 27, 2018, GM said that as part of the transformation plan, 15% of the salaried employees would be laid off by the end of 2019, including 25% senior executives, 14700 layoffs and 14700 factories in 5 North America and 2 North America.

In twenty-first Century, according to the incomplete statistics of publicly available data, by the end of November this year, the layoffs of several mainstream car companies have spread to nearly 80 thousand global automobile workers.

Cutting costs, restructuring the organization, improving efficiency, and greeting electric and digital transformation, in the opinion of industry experts, behind the downsizing of car companies is the contradiction between the decline in profits from the global automobile market and the huge investment facing the future.

Global car companies in the throes of transformation

Affected by multiple factors, the world's three largest auto market continues to slump.

In December 4th, Bernhard Mattes, chairman of the German automobile industry federation (VDA), said publicly that the competition in the automotive industry will become increasingly fierce and the resistance will grow. He predicted that global auto sales will drop by 5% this year, the biggest decline since the 2008 financial crisis. Affected by this, German car companies will be laid off in 2020.

In China, the largest single market and profit source of many multinational automobile companies, "cold winter" still shrouded. "In 2020, the auto market will continue to bottom down, and it will be warmer at the end of 2020." In December 1st, Lang Xuehong, Deputy Secretary General of the China Automobile Circulation Association, gave a prediction at the sixteenth China import vehicle high-level forum.

In Europe, car sales continue to slide under the influence of new regulations, and the US auto market is also gloomy with the rise of interest rates and the multiple duties of the Trump administration, such as tariffs and international trade relations.

Under the continuous downward trend of the overall automotive market, sales decline and sharp profit reduction have become the main theme of most automobile companies.

In the second quarter of this year, Daimler group suffered a quarterly loss for the first time in 10 years. Daimler group said its operating profit fell by more than 10% this year.

In the three quarter of this year, Daimler's pre tax profit was 2 billion 490 million euros ($2 billion 850 million), a decrease of 27% compared with the previous year (3 billion 410 million euros). In the same period, Mercedes Benz profit before tax was 1 billion 370 million euros, or 35%.

Daimler warned investors that its pre tax profit this year will be substantially lower than last year's level. Mercedes Benz, the main contributor to the profits of Daimler, will also lag substantially behind the previous year.

Companies also need to face the decline in profits and Nissan. More than a year after the "Ghosn incident" broke out, the company was on the cusp. Executives fled, slashing jobs and worsening alliance relations, making Nissan's profits plummeted to its lowest level in 10 years.

In November 16th, Nissan released its two quarter (July 1st September 30th) earnings report. Its revenue was 2 trillion and 630 billion yen (US $24 billion 124 million), down 6.6% compared with the same period last year, and its operating profit was 30 billion yen (US $275 million), down 70.4% from the same period last year.

"The global car market continues to decline, which is constantly eroding the gross profit and profit of car companies, while the investment in technology such as autopilot has increased the profit pressure." In the eyes of analysts, "many car companies are trying to control costs to avoid falling profits."

At the same time, in the face of increasingly stringent emission standards in the world, the transformation to electrification is the general trend.

Starting in 2021, the European Union will introduce more stringent vehicle emission standards, requiring car manufacturers to reduce their carbon dioxide emissions by 37.5% by 2030, based on 2021. The new policy will be implemented gradually from 2020. Cars that fail to meet EU emission standards are not allowed to be sold. Otherwise, it will accept the huge fines imposed by the European Union.

But in the field of electric cars, automatic driving, sharing trips and so on, we need to invest hundreds of billions of dollars in the field. High R & D expenses and investment are also huge challenges that car companies must face in the process of transformation.

To avoid the EU's heavy fines, Volkswagen Group announced in November 18th that it will invest 60 billion euros (469 billion 700 million yuan) in the hybrid electric, electrification and digital fields in the next five years, and expects to launch 135 new energy vehicles in the next 10 years.

Auto giants embrace heating

Since then, the Daimler car block has been split into PSA and FCA merger. In the eyes of many people in the industry, the merger and reorganization of the global car companies show the determination and anxiety of the car companies in the great changes of the industry.

In November 1st, Daimler announced that in order to deal with the new challenges, enhance its customer focus and enhance its flexibility, it transformed from a simple car manufacturer to a mobile travel service company. The company launched a new corporate structure and allocated the original five major business segments to three independent subsidiaries of Mercedes Benz, Daimler truck and Daimler Financial Services Company. This is the biggest restructuring of Daimler in nearly ten years, following the sale of Chrysler in 2007.

Daimler said that the initial restructuring initiative invested 100 million euros (about 780 million yuan). Meanwhile, in order to maintain the lead in the new "four modernizations" competition, Daimler is expected to launch more than 10 pure electric vehicles in 2022, covering every vehicle. It is estimated that by 2030, Mercedes Benz's electric motorized vehicle will have a total sales volume of 12 million 700 thousand vehicles, accounting for more than 50% of the total sales volume. As a result, Daimler will invest up to 10 billion euros (77 billion 60 million yuan) in electric vehicles.

In addition, in order to cope with the great challenges brought about by the transformation process, cooperation and alliances are a better strategic choice for most car companies. Through alliances, we can share high development costs and risk sharing.

Take the merger of FCA and PSA as an example, only a simple merger, without considering any factory closures, can save 3 billion 700 million euros a year. More importantly, the newly merged companies will continue to exert themselves in the aspects of electrified powertrain, automated driving and digital interconnection to meet the sustainable mobile travel era in the future.

It is reported that in order to ease the relationship between the alliance, Renault Nissan MITSUBISHI alliance will set up a new joint venture to focus on the development of advanced automotive technology, which will also become one of the main tasks of the Renault Nissan MITSUBISHI alliance.

Earlier, BMW and Mercedes Benz, Volkswagen and Ford announced their cooperation in the field of electric vehicles and driverless cars. At the end of February this year, BMW and Mercedes jointly announced that they would invest 1 billion euros to set up 5 travel companies to launch integrated taxi, parking and electric vehicle charging business, so as to compete against Uber and other competitors. In July this year, the public collaborated with Ford in depth. Ford shared the mass modular pure electric platform MEB for electric vehicle research and development, and the public invested $2 billion 600 million in Argo.AI, a subsidiary of Ford autopilot company.

"No matter whether the car companies are laying off or holding together for heating, this is just the beginning of the future transformation." In the industry view, in the short term, the purpose of a series of initiatives is to reduce costs as soon as possible to get out of the haze of the winter market, but can not solve the problem of profitability.

"In the long run, although transformation is still the only way out for car companies, how to achieve sustainable profitability in the transformation process is the fundamental problem that car companies must face in the next few years." These people finally said.