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Daimler pledges that cost cuts today will fund the cars of tomorrow

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Ola Kallenius, the German automaker's chief executive officer, told reporters at the Consumer Electronics Show in Las Vegas that he's looking to trim costs across Daimler's sprawling industrial operations to free up cash that will fund new technologies for the cars of tomorrow.

[FRANKFURT] Daimler AG's investment in future technologies such as electric cars and self-driving software is taking a bite out of its traditional automobile business.

Ola Kallenius, the German automaker's chief executive officer, told reporters at the Consumer Electronics Show in Las Vegas that he's looking to trim costs across Daimler's sprawling industrial operations to free up cash that will fund new technologies for the cars of tomorrow.

"The financial performance has to be there. Otherwise the other things won't happen," Mr Kallenius said. "It's going to be a rather tough time" in coming years, he said.

Daimler mapped out a plan last year to eliminate more than 10,000 jobs worldwide and revive profit margins squeezed by heavy investments. It got shareholder approval to fold its car, commercial-truck and mobility-services operations into separate legal entities to make them more nimble. The personnel cuts - equal to at least 3.3 per cent of the workforce - will be carried out by the end of 2022 with a goal of lowering costs by US1.4 billion euros.

The world's top producer of luxury and commercial vehicles set the scene for the cutbacks two months ago when Mr Kallenius warned investors returns may remain depressed for the next two years. A target for 2020 of at least 4 per cent operating return on sales at the main Mercedes-Benz car unit disappointed investors, coming in at about half of what French mass-market peer PSA Group generated in the first half of last year.

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"The capital intensity is very high at the moment and customers are increasingly willing to pay for new technology," Mr Kallenius said. "But not yet the full price."

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