Daimler to cut out suppliers to fund software hiring spree

Daimler will cut out traditional parts makers in order to fund a software development push that will involve hiring thousands of coders to build an operating system that rivals Tesla’s.

The Mercedes-Benz owner would buy fewer electronic components and “replace supplier development costs with personnel, building and computing costs”, Ola Kallenius, the company’s chief executive, told the Financial Times.

“Down the road, once we have gotten farther in this endeavour, I believe we could actually operate at a lower fixed cost level,” the Swedish boss added.

We will pay less money to suppliers and then employ people in other places.

The German group, which is in the middle of a painful restructuring as it struggles to pay for a late foray into electric vehicles, wants to own more of the complex technology that powers modern cars.

“We want to have one comprehensive operating system that goes from our A class to S class [cars],” Mr Kallenius said, citing Apple’s iOS, which powers the iPhone, as inspiration.

In a bid to offer customers a more seamless experience, and own the data produced by connected cars, Daimler is moving more software development in-house.

Those plans add to fears over job losses at the world’s biggest auto suppliers, including Continental, Bosch and ZF, who sell electronic control units and software to large car manufacturers and are collectively shedding tens of thousands of jobs in a struggle to adapt to the battery vehicle age.

As well as having to write down the value of their combustion engine expertise, the largest clients of parts makers are increasingly looking to develop their own tech.

Volkswagen recently consolidated its software ambitions under a new organisation that will employ more than 5,000 people and has vowed not to work with Silicon Valley giants.

Unlike some rivals, Daimler, which has built its own proprietary battery management software, is not opposed to working with partners.

Mr Kallenius said the Stuttgart-based group had “thrown everything into” a collaboration with Nvidia, focused on developing an architecture that will enable autonomous driving. The company also works with Microsoft on cloud computing.

He emphasised that Daimler would forge “several partnerships” as it accelerated its software push, especially in areas such as in-car navigation and entertainment, which external providers have perfected.

“Would it make sense for us to make our own TripAdvisor? Of course, it wouldn’t and we won’t,” he said. “It would be unrealistic for us to do everything from scratch and everything ourselves, and that wouldn’t be economical.”

Daimler unveiled a new strategy in October, vowing to “avoid non-core activities” as it aimed to cut a fifth of its fixed costs over the next four years.

Despite being on a software “hiring spree”, Mr Kallenius said he was confident that target would be achieved.

While selling petrol and diesel cars alongside electric vehicles, Daimler was “kind of doing everything”, and costs were consequently at a peak, he added. “We will significantly lower our spend on the combustion engine side in the next five years.”

Separately on Thursday, Daimler announced it would propose BMW and VW veteran Bernd Pischetsrieder as head of its supervisory board, once Manfred Bischoff’s term ends next year.

The move comes after Dieter Zetsche, the predecessor of Mr Kallenius, ruled out a return to the company.

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