Daimler workers protest over dealership revamp plans in Germany

Mercedes depends on company-owned dealerships for roughly half of its sales in Germany.
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FRANKFURT -- Workers at Daimler are opposing plans by the carmaker to restructure its German network of Mercedes-Benz dealerships owned and operated by the company.

Daimler has said it is looking at what to do with these outlets as part of plans to cut costs at the Mercedes premium brand and narrow the profitability gap with rivals. The company is in discussions with potential investors on the possible sale of some of Mercedes’ sales sites in four cities in the states of North Rhine-Westphalia and Lower Saxony.

"We fear that branches could be spun off from Daimler and sold," a spokeswoman for union IG Metall said in a statement.

The union wants Daimler to extend an agreement, originally reached in 2008 and prolonged three years ago, that largely keeps all the outlets open through 2016 and retains all employees through 2018.

A Mercedes spokeswoman said no decisions had yet been taken on the network. "There are different plans under consideration for our own retail operations, about which we are in talks with staff representatives," she said.

Unprofitable dealerships

In Germany, Mercedes depends on its unprofitable company-owned dealerships for roughly half of its car sales, a bigger share than for rivals Audi and BMW brand, which rely more on franchises. In total, the company owns 33 Mercedes dealerships in Germany, with 158 locations, compared with 90 independent representatives running 438 sales outlets, Daimler said.

ISI analysts estimate labor costs equate to 16 percent of Daimler's sales, against 12 percent for BMW and 10 percent for Audi.

Analysts would welcome any plans by Daimler to revamp its own dealership network, especially in light of Daimler's high labor costs in comparison with rivals.

"This vertical sales integration is the key reason for Mercedes' margin underperformance," ISI analyst Arndt Ellinghorst wrote in a note. "Addressing this issue via restructuring or selling parts of these activities should be seen as a strong positive."

IG Metall organized a protest day on Monday, saying beforehand that it expected about 4,000 workers to take part. Daimler employed around 275,000 people in total in 2013.

Reuters and Bloomberg contributed to this report

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