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Daimler suspends production for 1 month

 
1,436 views Oct 27, 2008
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Mercedes' C-Class wagon production line in Bremen, Germany

Mercedes' C-Class wagon production line in Bremen, Germany

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Even the upper tier of the mass-market luxury car manufacturers are facing troubled times this year. Sales are down, inventories are up and there appears to be no end in sight. In response to this situation, Daimler has decided the right move is to cut all production for at least one month, beginning December 11 and ending January 12, according to the latest reports.

The new follows on the heels of last week's announcement of a large drop in quarterly profits, and the company is now speaking openly of the problems facing the industry, reports AFP. "The financial crisis is turning into an economic crisis," said Daimler chairman Dieter Zetsche in a telephone news conference. He even remarked that "in recent weeks a dramatic slump on our major markets" had been seen, forcing the company's hand into action.

Daimler reportedly has other irons in the fire as well. It is considering selling off its remaining 19.9% stake in Chrysler to Cerberus Capital Management even as that company seeks a merger with General Motors. Whether the sale would net a substantial amount of cash is doubtful, however, since the company reportedly valued its holding of Chrysler stock at $0 last week. Company officials later called the figure an accounting number, indicating it had no real significance, however.

The Abu Dhabi Investment Authority is also a possible source of cash in the near term for Daimler, as the group is reputed to be interested in purchasing a stake in the German company. The investment fund itself is estimated to be worth between $650 and $875 billion, giving it ample resources to negotiate such a purchase. Daimler has to date denied any plans or negotiations for such an investment.



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