UPDATE 1-Daimler to cut production at largest car plant

Mon Sep 24, 2012 1:57pm EDT

* Management, staff reps in talks at Sindelfingen plant

* All production lines affected - source

* Daimler had warned on profit at Mercedes-Benz (Adds more from spokesman, report, background)

STUTTGART, Germany, Sept 24 (Reuters) - Daimler is planning to cut production at its largest car plant, a source familiar with the situation told Reuters, as deteriorating markets in Europe and China hit sales of its Mercedes-Benz cars.

All production lines at the Sindelfingen plant are affected, and labour representatives and management are currently negotiating shift plans, the person told Reuters on Monday.

After warning last week on profits at Mercedes, Daimler said it would come up with a cost savings programme, which sources had told Reuters would total over 1 billion euros ($1.3 billion) but not include job cuts.

Relations at the plant over shifts for the fourth quarter are so strained that Daimler has called in mediators to settle the dispute, German paper Stuttgarter Zeitung reported in an advance copy of a Tuesday article.

The paper added that the S-Class saloon was doing especially badly, citing employee sources.

A Daimler spokesman declined to comment on current talks with staff representatives. "We are however looking at demand and will adjust our output to keep stocks at the optimum level," he added.

The spokesman also said that Daimler still planned to increase employee numbers by 250 people by 2014.

The comments last week by Daimler's CEO Dieter Zetsche that the group was gearing up for a "challenging environment" in Europe and China had also spooked investors in rivals BMW and Volkswagen.

China is a major source of profits for German luxury carmakers and has thus far helped shield them from the woes being felt by mass brands dependent on weakening markets in Europe.

Mercedes, however, has been suffering more in China than its competitors, which Zetsche has partly blamed on their local sales organisation.

China sales grew only 3 percent last month, whereas BMW sold 38 percent more cars and Audi 24 percent more. ($1 = 0.7743 euros) (Reporting by Hendrik Sackmann; writing by Victoria Bryan; Editing by Martin Zwiebelberg and David Cowell)

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