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Reducing work hours and pay to safeguard employment at Daimler AG

Muamer Hodzic April 29, 2009

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The management and the Employee Council of Daimler AG have agreed on a package of measures to be taken to reduce labor costs, so that they can safeguard employment at Daimler AG manufacturing plants. The key points of the agreement are the reduction in working time for employees who are not included in short-time working arrangements, a reduction in the allowance paid towards the short-time compensation and the postponement by five months of the upcoming wage-tariff increase.

As a result of these measures and of other measures previously decided upon, the labor costs of Daimler AG will be reduced by $2.7 billion in the current difficult economic situation. The measures include actions to reduce costs and to avoid increased expenditure.

In return, it has been agreed that all employees will be protected against termination of employment for reason of business operations for the duration of the company-wide agreement from May 1, 2009 until June 30, 2010. The company-wide agreement can be terminated as of December 31, 2009 at the earliest, depending on the economic situation. Also after the termination of the agreement, the shared goal is to safeguard employment at the company.


The package of measures to be taken has today been presented to the workforce of Daimler AG at extraordinary employee meetings.
Wilfried Porth, Member of Daimler’s Board of Management for Human Resources and Labor Relations Director: “In the present economic situation, there is no alternative to this package of measures. A key feature of the package is that all employees will make their own contribution. I am aware, however, that the measures involve painful losses for many of our employees.”

Erich Klemm, Chairman of the Employee Council and Deputy Chairman of the Supervisory Board: “The Employee Council’s main objective in Daimler’s present highly precarious situation is to protect the jobs of the entire workforce. The cost-reducing measures now agreed upon are designed solely to serve this goal. We are aware that the measures to be taken involve significant financial losses for the employees and will only be accepted if they are implemented fairly. This was one of our top priorities in the negotiations. All employee groups will be protected by the agreement and everyone will make a contribution towards reducing costs. The entire management team up to the Board of Management and the Supervisory Board will also be included in the cost reductions. When the order situation improves, we will return to normal circumstances once again.”

For all those employees who are not included in short-time working arrangements, there will be a general reduction in working time of 8.75% without compensation as of May 2009. This does not apply to apprentices, trainees or interns, or to employees involved in early retirement arrangements.

With regard to the allowance paid towards short-time working compensation, at its sites in Baden-Württemberg Daimler will implement the new collective bargaining agreement on “short-time working, qualifications and employment” for the region of North Württemberg/North Baden. The collective bargaining agreement makes it possible to reduce the allowances paid so that short-time working can be financed for longer periods. Daimler is implementing the model foreseen by the collective bargaining agreement by which allowances paid towards short-time working compensation are graded in line with the volume of work lost. Daimler will continue to pay voluntary allowances at similar levels for its sites outside Baden-Württemberg.

In addition, the management and the Employee Council have agreed to postpone the upcoming wage-tariff increases from May until October 2009. The one-time payment due in September according to the collective bargaining agreement will be reduced accordingly.

The proportion of apprentices to be offered employment contracts has also been renegotiated for those persons who started their apprenticeships in 2006 and 2007. This is based on a company-wide agreement from the year 2005 and includes an increase of 5% in the number of apprentices and a takeover ratio of 80%. The company and the Employee Council have agreed that all apprentices of those two entry years will be offered employment contracts with a 28-hour working week. In this way, Daimler will continue to fulfill its social responsibility. The 20% of apprentices who according to the previous regulations would have had to leave the company at the end of their apprenticeships will now be offered an employment contract limited to a period of one year as well as professional support for occupational reorientation outside the company. Once again this year, the number of apprenticeships at the Group will be maintained at a comparable level to 2008.

No final agreement has yet been reached on implementing the non-payment of the profit-sharing bonus for the year 2008, which was decided upon previously. The management and the Employee Council have discussed the possibility of placing the profit-sharing bonus in an employee-equity scheme. The preconditions for this model are to be clarified in a joint workgroup by the end of 2009. If the application of this model should not be possible, the bonus will be paid out in consultation with the Employee Council in either May or October, 2010.

Daimler’s Board of Management and top executives will be included in the cost-reducing actions once again and will also do without a part of their monthly basic salaries for a limited period starting in May. The percentage share of monthly salary reductions increases with rising responsibility. The usual annual increase in monthly salaries will also be omitted this year. The variable components, including pension contributions, have already decreased significantly. Solely through the reduction of monthly remuneration, senior executives are waiving the equivalent of one monthly salary and members of the Board of Management are actually waiving the equivalent of two monthly salaries on an annual basis. Furthermore, the Supervisory Board will also decide soon on its own contribution.

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