Daimler signs deal to make Untertürkheim plant EV R&D Centre as CEO's pay falls 21% in 2016
Daimler has announced a programme to turn its Untertürkheim site into an EV competence centre, but the plan is unlikely to alleviate the pressure on jobs in the long term as the gradual switch is made to electromobility.
IHS Markit Perspective:
- Significance:Daimler has announced that it will turn its Untertürkheim powertrain plant into a new R&D and production centre for its new electric mobility powertrains that will power its future range of EQ models. It also announced that CEO Dieter Zetsche's overall remuneration package dropped in 2016.
- Implications:The giant Untertürkheim plant employs 19,000 people at its six sub-plants and also hosts Daimler AG's corporate headquarters. With many of those employees producing conventional powertrains and transmissions, they are at risk from the shift to electromobility as EVs do not require the heavily industrialised and complex manufacturing process involved in conventional ICE production. Daimler is moving to mitigate the effects of increasing electromobility by making this investment.
- Outlook:Daimler is ensuring it has the R&D and production provision in place to manage the shift to electric vehicles while also looking to put its workforce at ease over the gradual shift which will take place over the next 20 years. However, it is also likely that Daimler will carefully manage its staffing levels at Untertürkheim over the next decade, while significant retraining will be required for any existing workers who will be repurposed from ICE and transmission production to electromobility.
Daimler has announced that it will invest in making its giant Untertürkheim powertrain and transmission plant the centre of research and development (R&D) efforts in the area of electromobility by establishing a new "e-technology centre", according to a company statement. This new facility will be the competence centre for electric drives and prototype systems will be designed and built at the centre. Some of the facility's existing manufacturing capability will be repurposed towards making the first steps in the assembly of electrified powertrain modules, and the facility will also start producing components for electric vehicles. However, although Daimler is preparing Untertürkheim to be its competence and production centre for electric powertrains it has also committed to further expansion of its conventional internal combustion engine (ICE) powertrain production programme. It has committed to manufacturing what Daimler describes as a new generation of high-efficiency in-line engines; the production of engines, transmissions and axles will remain an integral part of the Untertürkheim's plant activities for the foreseeable future.
One of the main structural changes that will take place at Untertürkheim as a result of this new strategy is that the manufacturing of fuel system components and turbine housings will be relocated in order to repurpose their production areas for electromobility components. Workers in these areas will be offered equivalent jobs in similar areas or in the field of electric powertrain production. Commenting on securing this fresh investment commitment, the plant's works council chairman Wolfgang Nieke said, "This agreement is an important signal for the future. We aim to set the course for alternative and emission-free powertrains. We want to produce the electric powertrain in the Neckar Valley. Today the Untertürkheim plant is producing the heart of our vehicles. And that is how it should be in the future and we are working hard for this goal."
Daimler announced in its company report for 2016 that CEO Dieter Zetsche's overall remuneration package fell by 21% year on year (y/y) to EUR7.6 million. This was on a slight fall in operating profit for 2016 despite rising metrics in almost every other important area, including sales and revenue. Once share options were taken into account Zetsche's combined package came to EUR13.8 million for 2016; this was down from EUR14.4 million the year before.
Outlook and implications
The agreement for Untertürkheim to become the competence and likely manufacturing centre for electric drivetrain is effectively a further extension of an agreement the company and plant's works council agreed joint transformation plan from 2015 (see Germany: 19 March 2015: Daimler to invest EUR1 bil. in Untertürkheim powertrain plant in 2015). The "Zukunftsbild" was a framework for the Untertürkheim plant and its employees to move towards higher flexibility and efficiency while moving towards the production of future powertrain technologies, "comprising the production of high-efficiency combustion engines, plug-in hybrid powertrains and locally emission-free driving with fuel-cell technology." It makes sense for Daimler to enact this plan but it is also inevitable that any accelerated move in the European and global market towards electrification and other future powertrain technologies will put massive pressure on OEMs in terms of repurposing and cutting headcount for traditional powertrains and transmissions. EV powertrains are much less complicated than traditional ICE powertrains and do not have the wide range of castings, metal parts and mechanical components. Daimler and Mercedes-Benz will look to retrain and repurpose staff, but it is unlikely that the plant will need 19,000 staff in 20 years time. This move is also likely to put more pressure on rival OEMs like VW to come up with compelling plans to put workers' minds at conventional powertrain plants to rest over future investment, R&D and production plans in the field of alternative powertrains. The drop in Dieter Zetsche's overall pay and bonuses is a reflection of the lower EBIT the company achieved in 2016, despite breaking records in almost every other area. However, given the scale of Zetsche's overall pay package, this decline is hardly significant.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.
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