BMW to cut thousands of jobs

BMW plans its first large-scale job cuts as the world's largest luxury carmaker tries to close the profitability gap with Mercedes-Benz.

The German carmaker is likely to cut 8,000 jobs but would only say on Friday that it was likely to cut thousands, starting next year.

Executives said the majority would fall in Germany, where about 75 per cent of BMW's 107,000-strong workforce is based. The cuts would include several thousand full-time employees as well as temporary workers via early retirement, buy-outs or natural attrition.

The fact that BMW has not resorted to large cuts before highlights the pressure it is under from shareholders to catch up with Mercedes, owned by Daimler.

BMW's return on sales was just 5.4 per cent in the third quarter in its motor business against 9.5 per cent at Mercedes, even though BMW is expected to report record profits this year.

Mercedes has escaped from the shadow of Chrysler, which Daimler sold this year, as a series of job cuts and management changes have resuscitated the brand after a loss in 2005. "When we see where Mercedes is today, the question for the management is simply: 'Why are we not there too?'," said one BMW director.

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