MERCEDES CAR GROUP DIVISION DAY

Transcription

1 MERCEDES CAR GROUP DIVISION DAY Process efficiencies and cost reductions the MCG-CORE project Rainer Schmückle MCG COO Stuttgart September 19th, 2006

2 Agenda MCG Division Day Rainer Schmückle 1. CORE achievement Current status 3. Main focus: process efficiencies & cost reductions

3 What is MCG-CORE? CORE is the most comprehensive and important mobilization program of the last years within MCG. CORE principles Needs Milestone Destination - benchmark driven balance brand requirements and competitive cost position - line function driven increased flexibility 7% RoS in 2007 Business Excellence - openness and personal responsibility implement continuous improvement culture

4 Mercedes Car Group CORE CORE PROJECT SETUP & RESPONSIBILITIES Schmückle Dr. Weber Koch Schmückle Schmückle Dr. Maier Schmückle Walker Projects / Modules / Architecture Fixed Costs, Net Assets Efficiency Production Material Costs Quality / Warranty smart Marketing/ R&D Sourcing Production After-Sales Administration Revenue Offensive Continued Execution under the leadership of Executive Team MCG

5 CORE target achievement 2005 Accumulation of Negative Impacts Internal Impacts 2004 to 2005 RoS Development Increased Complexity Project Deviations smart Performance Warranty Cost Product Cycles External Impacts 3,4% -1,0% MCG-CORE Currency Raw Material Quick Wins in 2005 / Structural Changes 2006f. Incentive Spending

6 Main levers of CORE around measures in 2005 Work module Main levers # measures WM1 - Projects Review of new vehicle / powertrain projects, model years and freshenings Reduction of product complexity and development costs (internal and supplier) Optimization of plant/structure and sales projects 250 WM2 Fixed Costs, Net Assets Fixed costs optimization & net asset reduction General Quick wins (Expenses for travel, consulting, training, company cars, ) Optimization of processes and overhead costs (e.g. HR, QM, F&C, Strategy, MDS,...) WM3 Efficiency Production Plant productivity worldwide (reinforced CIP, reduction of non-tact related activities, shift model optimization) Personnel cost (avoidance of extern. recruitment and overtime, flexibility increase, ) WM4 Material Costs WM5 Revenue Offensive Technical efficiency (standardization, specs, substitution, ) Commercial efficiency (global sourcing, make or buy, ) Freights / duties (processes, standardization, centralization, ) Volume, mix Prices, discounts Patents, LA2/LA WM6 Quality / Warranty Reduction of fault rate Reduction of fault elimination times Reduction of W&G costs 10 WM7 smart smart turnaround: general restructuring, reduction of fix cost budgets on research & development, production & purchasing, marketing &sales, overhead & IT 400

7 MCG-Result 2005 Without the program MCG-CORE, ROS of MCG would have been significantly worse in 2005 (w/o sri). OpPr MCG 2005 (w/o sri) +2% RoS With CORE W/o CORE-success % through CORE Without CORE -3% RoS

8 MCG Division Day Rainer Schmückle 1. CORE achievement Current status 3. Main focus: process efficiencies & cost reductions

9 Current status environment MCG Some of the headwinds are prevailing throughout 2006 and Exchange rate risk Raw material steel cost increase Raw material aluminum cost increase Raw material plastics cost increase Energy cost increase Launch cost of C-Class in 2007 CORE stretch level adjusted to deal with external challenges

10 Current status CORE 2006 Status CORE 2006 Implementation level Category target line 1% evaluated 43% decided 100 % 21% Material Costs* 11% Manufact. Costs 36% Revenues MB PC 56% implemented 16% Fixed Costs (incl. CapEx) 8% Warranty 8% smart * net of content increases

11 Status CORE 2007 Status CORE 2007 (Incremental target) Implementation level Category target line 15% analysis 25% identified 100 % 37% Material Costs* 20% Manufact. Costs MB PC 40% evaluated 8% Revenues 16% Fixed Costs (incl. CapEx) 11% decided 9% implemented 12% Warranty 7% smart * net of content increases

12 MCG Division Day Rainer Schmückle 1. CORE achievement Current status 3. Main focus: process efficiencies & cost reductions

13 Main Focus of CORE work modules (WM) WM1: Module strategy & architecture WM3: Production Efficiency Variant reduction 99-75% 25 Act. Target EXAMPLE Cooling module Savings EUR > 20 m p.a. WM4: Direct material optimization Functional teams Po wer train Electr ical/ electr onics In teri or 1 July - N ov Supercharging Telematics Complete seat incl. seat components 2 Nov. - Ma rch /2 006 Gear components Display and operation Heating, climate, ventilation 3 April - Juny 2006 Generators, starters Electronic brake systems P aneling, decor, accessories 4 June - Sept Raw material Central systems IP, center console, no zzl es WM6: Quality increase & warranty cost reduction R& D Develoment of fault rate Number of faults/ 100 vehicles Quality strategy Pur chasing Prod. Sales Finance after sales IT Adm in. Performance fulfillment in individual functions (outline of main principles) Benchmark Faul t eliminati on ti mes Reduction in W&G costs Exterior Add -on parts Doors Molded parts Wind ows, roof Chassis Suspension/ insulation 11 scope s Brake system 12 scope s Wheels/tires 12 scopes Mountin g elements, frame parts 8 scope s Current Target Reduction number of faults Months Current Target Significant reduction in fault elimination time Current Re du c Target -tion Substantial cost reduction

14 Main Focus of CORE (Module Strategy) Each module will be tracked along several targets to enable successful vehicles. MODULE SHELF Cost targets Quality targets Complexity targets Competitive Differentiation Manufacturing targets (e.g. time, PPG)

15 Main Focus of CORE (Module Strategy) By end of 2007 over 100 module strategies will be developed to enable amendments of quality, cost and function early impact is targeted. Decided module strategies [#] Savings [EUR] 70 >100 Pulling forward the impact of the module strategies already into upcoming face-lifts is targeted (based on overall positive business case) Face-lift New 2nd q. 4th q. 2nd q. 4th q

16 Main Focus of CORE (Production Efficiency) Optimization of HPV as the lever for production efficiency - a challenge for all functions HPV in 2006 already decreased by 10%. HPV Hours per vehicle achieved in 2006: 10% midterm target: 30% Benchmark midterm

17 Main Focus of CORE (Production Efficiency) The Standardbegehung creates ideas to reach the HPV targets using intense interdisciplinary cooperation of all functions. Design for Manufacturing Efficiency of production Variants Modul Strategy CORE WP 1.3 CI-Process Standardized assembly Indirect Labor activities Project Model T Changes in Series Production Reductions of Variants in Series Production Module Strategy CORE WP 1.3 Standardbegehung (Standardized process for plant efficiency optimization) ideas ideas ideas The Standardbegehung Every plant Every worker Every part Every process 1. SB direct labor Indirect labor 2. SB direct labor 06/04 06/06 06/08 06/10 06/12 07/02 07/04 07/06 07/08 07/10 07/12 08/02 08/04 08/06 08/08 08/10 08/12 Pilot Implementation implementation

18 Main Focus of CORE (Direct Material) Analysis of total direct material in cross-functional teams Functional teams 1 July - Nov Nov. - March 2005/ April - July July Oct Powertrain Supercharging Gear components Generators, starters Raw material Electrical/ electronics Interior Telematics Complete seat incl. seat components Display and operation Heating, climate, ventilation Electronic brake systems Paneling, decor, accessories Central systems IP, center console, nozzles Exterior Add-on parts Doors Molded parts Windows, roof Chassis Suspension/ insulation 11 part groups Brake system 12 part groups Wheels/tires 12 part groups Mounting elements, frame parts 8 part groups

19 Main Focus of CORE (Direct Material) Target Achievement 2007 is on track Wave 1 Wave 2 Wave 3 Wave 4 July 05 Nov. 05 March 06 July 06 Oct. 06 today Compensation of raw material increase + significant cost reduction

20 Main Focus of CORE (Quality) In the field of quality, our new quality strategy with 42 work packages is currently being implemented. Quality strategy Purchasing R&D Prod. Sales Finance after sales IT Admin. Performance fulfillment in individual functions (outline of main principles) Development of fault rate Number of faults/100 vehicles Benchmark Fault elimination times Reduction in W&G costs Current Target Reduction number of faults Months Current Target Significant reduction in fault elimination time Current Reduction Target Substantial cost reduction

21 Main Focus of CORE (Quality) Examples of implemented quality measures Optimized Repair Methods Efficient Field Processes -87% 691 /Case 89 /Case Increase of training for service staff Definition of further standard processes for all countries Repair kit Flash light Preventive Quality Intensified testing in the early development phase Quality driven ramp ups for all new model lines Reduced Failure Elimination Time Implementation of escalation process Advanced IT-systems Supplier Quality Measures > quality meetings with suppliers in 2005 Closer cooperation on common Q-standards 34 % 13 % 12 % average nu mber of com plain ts /2006

22 DISCLAIMER This presentation contains forward-looking statements that reflect management's current views with respect to future events. The words anticipate, assume, believe, estimate, expect, intend, may, plan, project and should and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties, including, but not limited to: an economic downturn in Europe or North America; changes in currency exchange rates, interest rates and in raw-material prices; introduction of competing products; increased sales incentives; the effective implementation of our New Management Model, and the CORE program, including the new business model for smart, at the Mercedes Car Group; renewed pressure to reduce costs in light of restructuring plans announced by our major competitors in NAFTA; disruption of production or vehicle deliveries, resulting from shortages, labor strikes or supplier insolvencies; the resolution of pending governmental investigations; and decline in resale prices of used vehicles. If any of these or other risks and uncertainties occur (some of which are described under the heading Risk Report in DaimlerChrysler s most recent Annual Report and under the heading Risk Factors in DaimlerChrysler s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission), or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement, which speaks only as of the date on which it is made.