Dec. 2 (Bloomberg) -- Daimler AG, the world’s second- largest maker of luxury cars, will move some production of its best-selling Mercedes-Benz C-Class model to a plant in Alabama, chasing the cheaper dollar and reducing its dependence on German factories.
The Tuscaloosa site, Daimler’s only car factory in North America, will produce the vehicle starting in 2014, when a new version is due to be introduced, the Stuttgart, Germany-based company said today in a statement. The Sindelfingen facility near Daimler’s headquarters will cease production of the mid- sized car after more than 25 years, leaving Bremen as the only German assembly site for the model.
Seeking to keep pace with luxury-car leader Bayerische Motoren Werke AG while fending off Volkswagen AG’s Audi, Daimler Chief Executive Office Dieter Zetsche is cutting expenses, targeting savings this year of as much as 5 billion euros ($7.5 billion). The company will save about 2,000 euros per vehicle by making C-Class cars in Alabama rather than Germany, Chief Operating Officer Rainer Schmueckle told reporters today.
“The old business model where you can produce in Germany and export to the rest of the world doesn’t work anymore,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “Western European auto production has passed its peak.”
Share Performance
Daimler rose as much as 1.9 percent in German trading and was little changed at 35.12 euros at 10:38 a.m. The stock has advanced 32 percent this year, compared with a 46 percent increase for BMW.
Due to the weaker dollar, assembly workers in Alabama earn the equivalent of about 30 euros an hour compared with 50 euros in Germany. The currency also depresses the amount that Daimler gets for a C-Class in the U.S., where prices are about 6,000 euros lower than in Germany.
“The decision to produce the C-Class closer to the markets will make Daimler more independent of exchange rates, will optimize its profitability in this price-sensitive segment, and will allow it to fulfill regional customer requirements even faster and more flexibly,” Daimler said in the statement.
German employees called the decision “wrong” and “fatal” in a statement from the works council. Erich Klemm, Daimler’s top labor leader, said Daimler’s management is a “job killer.” Worker representatives plan a rally on Dec. 9.
Cheaper Labor
About 10,000 workers protested in Sindelfingen on Nov. 30 because of concern that the move could start a trend of work migrating to cheaper plants. Klemm said the shift threatened the loss of as many as 3,000 jobs at Mercedes-Benz’s largest plant. The C-Class, which will continue to be assembled in South Africa and China, accounted for almost 40 percent of Mercedes-Benz sales in 2008.
Daimler will add more than 1,000 employees at the plant in Tuscaloosa, which now manufactures M- and GL-Class sport-utility vehicles as well as the R-Class wagon, Schmueckle said. The factory, which has the capacity to make 160,000 vehicles a year, was founded in 1995 and employs about 3,800 people.
“He who produces in euros and sells in dollars is speculating on the exchange rate,” the executive said. “He who sells in dollars and produces in dollars doesn’t speculate.”
Sindelfingen, founded in 1915, produced 35 percent of Mercedes-Benz vehicles last year. In addition to the C-Class, the factory’s 28,800 workers assemble the S- and E-Class models as well as Maybach super-luxury cars.
‘Essential’ Step
“This step is essential for strategic and operational reasons, and helps the company to remain competitive and to fully utilize future growth opportunities,” CEO Zetsche said.
At current capacity, the Alabama plant would produce less than one-fifth of C-Class models, though the company plans “further investments” to increase capabilities in Tuscaloosa. Daimler sees “additional growth opportunities” in the U.S., where the sedan version of the series is the top-selling Mercedes-Benz.
“It’s the first step in a long overdue overhaul of the production system at Daimler,” said Christoph Stuermer, an automotive analyst with research firm IHS Global Insight in Frankfurt. “The Sindelfingen plant is over-cramped and doesn’t allow for modern logistics.”
Daimler employs about 60 percent of its 273,000 workers in Germany, while less than 25 percent of sales are generated in its home country. A new factory in Hungary, where workers are paid about one-fifth the wages in Germany, is part of Daimler’s shift to lower-cost manufacturing.
Daimler said it will move assembly of the SL roadster to Sindelfingen, largely offsetting the transfer of the C-Class work. About 1,800 other employees affected by the reorganization will be offered “attractive employment opportunities,” the manufacturer said.
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