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September 26, 2007

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CORE Program Successfully Completed to Achieve Sustainable Competitiveness

  • 43,000 individual measures lead to annual savings and revenue improvements of €7.1 billion at the Mercedes Car Group

  • Important contribution to reaching profit targets and improving competitiveness

  • Long-term measures will be transferred to the line organization and continuously tracked for implementation

Stuttgart - The Mercedes Car Group (MCG) has successfully completed its CORE program (Costs Down, Revenue up, Execution). CORE was launched in February 2005 with the objective to improve the competitiveness of Mercedes-Benz along the entire value chain and to achieve a return on sales of at least seven percent by 2007. The program was originally scheduled to be completed on December 31, 2007. With almost all of the measures implemented and the few remaining ones transferred to the line organization, the program will now be concluded on September 30, 2007. Despite increased expenditures for alternative and more efficient power train systems, the aim is to boost return on sales at the Mercedes Car Group to ten percent by 2010 at the latest.

 “The fact that we are able to complete CORE ahead of schedule - and, most importantly, with such success - is a testimony to the tremendous effort made by our employees and demonstrates that our organization has what it takes to get the job done. Their personal commitment and openness to change were indispensable in establishing a more competitive Mercedes organization. On behalf of my colleagues in the executive committee, I would like to express our gratitude to our employees for their contribution,” said Rainer Schmückle, COO of MCG. 

CORE involved the implementation of more than 43,000 measures to sustainably boost the competitiveness of the MCG. In 2007, these efforts lead to savings and revenue improvements of €7.1 billion versus 2004.

Even the name chosen for the program - “Costs Down, Revenue up, Execution” - made it clear that CORE is not only focused on reducing costs and boosting efficiency, but also on increasing revenues and returns.

The program was designed to create an organizational culture focused on execution, in order to generate outstanding products and services that fascinate and excite their customers. Quality improvement was also an important strategic goal of CORE.

“The success of CORE has given us an excellent basis for securing our leading role in the premium segment in the long run. Given the challenges we will be facing in the future - including negative currency exchange developments and rising costs of raw materials, as well as higher expenditures for the power train systems of the future - we must continue our efforts to improve our ability to perform every day. In today’s global competition, we can’t afford to be satisfied with the status quo. Only by continuously developing and moving forward can we become the top-performing organization that we need to be in order to stay in the lead - and make sure programs such as CORE are not necessary at all in the future,” said Schmückle in describing the outlook for the organization following CORE.

In 2005, during the first phase of CORE, “quick wins” were achieved through measures to be implemented in the short term, which were focused on the following objectives: reducing costs for materials, IT and travel; and consolidating and simplifying freight purchasing. In addition, vehicle and component projects were evaluated and adapted, for example the decision to produce the Mercedes-Benz GLK compact SUV.

In the second phase of CORE, decisions were made concerning numerous long-term measures. This phase also involved the implementation of workforce adjustments, based on voluntary cooperation by both sides. In total, around 9,700 employees took advantage of the severance packages offered. The workforce adjustment program was completed in 2006, representing about eight percent of the total improvements realized under CORE. The largest share of the cost reduction measures was therefore implemented in other areas.

CORE’s long-lasting, structural and process-oriented changes are now being transferred to the line organization, where they will continue to be consistently implemented. This will allow the ideas developed through CORE to continue to make a positive impact in the coming years, while contributing to the realization of the new profit targets. One important example of this is the cross-series modular shelf for Mercedes-Benz passenger vehicles. A total of 110 modules were defined, providing a foundation that will allow the company to develop and manufacture all vehicles more rapidly in the future, at even higher quality and at a lower cost.

Not only the Mercedes employees but also the suppliers played a key role in achieving the profitability targets. Through more than 300 workshops, cross-functional teams from MCG and its suppliers developed ideas on how to optimize processes, material costs, and quality despite of several drastic price increases for raw materials.

"Most of our suppliers have played a proactive role in the achievement of our CORE targets," says Rainer Schmückle. "We also hope to see this kind of innovative spirit in our suppliers in the future - in terms of new products and components as well as the continued optimization of business processes and our overall cooperation."

CORE is subdivided into seven work packages, each of which is headed by a member of the executive committee of the Mercedes Car Group. Each of the work packages consists of three to five sub-packages whose teams carry out assignments that has clearly defined goals but are networked with one another in many ways. The executive committee makes decisions concerning the ideas and measures generated within these teams and systematically monitors the implementation by means of a special IT tool. The cross-functional cooperation between all of the MCG managers and employees has been a key factor in the consistent implementation of these ideas and measures.

The successful results achieved through the CORE program contribute significantly to the overall positive momentum of the Mercedes Car Group. Especially against the backdrop of future investments in alternative power train systems, Mercedes-Benz will continue to build on these results and continue to work hard to become more efficient in all business aspects and thus become even more competitive.

(Sep 25, 2007)

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