The restructuring, which was approved by the company's supervisory board yesterday, cuts the number of business units from 35 to 23, abolishing middle and upper layers of management in the process. Daimler declined to comment on how many managers would be made redundant, or on estimates by analysts that possibly 1,600 senior jobs would be lost. All business units will report directly to the new 10-member board of management.
"As a result of the restructuring, the divisional managers will have a significantly larger measure of responsibility, and will be able to function as true entrepreneurs," the company's chairman, Jurgen Schrempp, said.
"This will encourage fast and flexible decision-making which will enable Daimler-Benz to secure and improve its competitive position in the international marketplace."
Analysts agree that the company's cumbersome structure has long been due for an overhaul, but remain divided about the wisdom of abolishing the autonomy of its most successful subsidiary. Mercedes-Benz was responsible for the bulk of the DM1.6bn (pounds 560m) profit estimated for 1996, carrying the burden for other units such as the aeronautics division Dasa which is barely breaking even.
Insiders suspect the fate of Mercedes was sealed by a long-running power struggle between its chairman, Helmut Werner, and Mr Schrempp, who emerges from the overhaul with greater control. Mr Werner resigned in disgust last week. A curt company statement issued yesterday "thanks him for his outstanding achievement to the group".
Analysts point out that whereas Mr Werner was a respected figure in the motor industry, Mr Schrempp, who will now have the final say over new models, worked his way up in Daimler Aerospace.
But there is no disputing Mr Schrempp's achievement in turning around Germany's industrial giant. After a record operating loss of DM5.7bn in 1995, Daimler-Benz was nudged back into the black last year.