Dwindling Demand Daimler to Halt Production for a Month

Carmaker Daimler plans to suspend production at its biggest factory in Germany for a month over Christmas due to the global financial crisis. The news comes just days after the company issued a profit warning for 2008.

Daimler is planning to shut down production at at least two Mercedes plants in mid December.

Daimler is planning to shut down production at at least two Mercedes plants in mid December.

The global financial crisis is slowly but surely seeping into the real economy. As people begin to tighten their belts in the midst of financial uncertainty and warnings of recession, it is carmakers that are among the first to feel the pinch.

This was made abundantly clear this weekend when German media reported that Daimler, the maker of Mercedes cars, was taking the dramatic step of shutting down production for five weeks at its main German factory. Citing a company spokesperson, the Frankfurter Allgemeine Sonntagszeitung reported on Sunday that the holiday vacations would start early this year at the Mercedes-Benz factory at Sindelfingen in southern Germany.

A works council spokesperson confirmed to Reuters on Monday that production is to cease on Dec. 11 and following one day of taking inventory the factory is to stay shut all the way through the New Year to Monday Jan. 12. A spokesperson from another Daimler factory at Stuttgart-Untertürkheim told reporters on Monday that production would also be halted there between Dec.15 and Jan.12.

Daimler's decision hasn't come as that much of a surprise considering the bad news the company released last week. On Thursday Daimler announced that profits for 2008 would be weaker than previously expected following a drop in third quarter earnings. Falling sales had caused pre-tax profits to plummet from €1.9 billion ($2.3 billion a year) ago to just €648 million ($807 million). A Daimler statement said that slumping economies and the financial crisis had had a "substantial impact on automobile markets worldwide during the third quarter."

"The financial crisis is turning into an economic crisis," Daimler Chairman Dieter Zetsche told a telephone news conference on Thursday. "The situation is very challenging," he said. "We are living in extraordinary times."

Daimler is not alone. On Sunday BMW announced that it was halting production for four days at its plant in Leipzig starting Monday. The pause will result in 2,800 fewer cars being built. However, the company said that the 2,600 workers at the plant will still be paid their full monthly wage.

General Motors' subsidiary Opel had announced at the beginning of October that it was temporarily suspending production at two of its German plants due to the sharp reduction in demand on the European market. Last week the company said that further shut downs were likely in November and December.

smd -- with wire reports


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