Weak dollar forces Mercedes to build more in U.S.

By @ibtimes on

Daimler (DAIGn.DE) will switch production of roughly a fifth of its Mercedes C-Class models to the United States from Germany in 2014 in a move to avoid damaging currency fluctuations and protect its margins.

The announcement raised fears among workers in Germany that Daimler's home market is losing importance as a production hub for luxury vehicles and workers at the key Sindelfingen plant downed tools in protest.

Daimler's plan marks another step in a broader strategy by global corporations to concentrate production and sales of products within the same currency or trade zone.

Rival BMW (BMWG.DE) recently increased production capacity at its U.S. site in Spartanburg, South Carolina for similar reasons.

The IG Metall union said Daimler's move was a blatantly wrong decision putting about 3,000 jobs at risk and pledged to fight it with all means at its disposal.

German labour leaders are already alarmed at proposals to shed thousands of auto workers' jobs at Opel under parent GM's [GM.UL] restructuring plans.

From a strategic and economic point of view, this step is absolutely necessary for Mercedes-Benz to remain competitive in the future and utilise its chances for growth, Daimler Chief Executive Dieter Zetsche said in a statement on Wednesday.

LESS VULNERABLE

Daimler said producing more vehicles in the United States will make the company less vulnerable to currency swings between the euro and the dollar, and enable savings of about 2,000 euros per C-Class compared with cars imported from Germany.

Daimler's personnel head Wilfried Porth told a telephone conference there would be no job cuts in Sindelfingen and that the company planned to add 1,000-1,200 jobs in the United States from 2014.

Daimler's Mercedes-Benz passenger car production site in Sindelfingen employs more than 36,000 staff. About every third car sold by Mercedes-Benz worldwide is a model from its C-Class family, which also includes the coupes SLK and CLK.

German luxury carmakers have drawn few benefits from the flurry of subsidy programmes like the cash for clunkers schemes and have been suffering hefty declines globally this year.

Daimler shares rose 0.3 percent to 35.19 euros at 1247 GMT, while Germany's blue-chip DAX index .GDAXI fell 0.04 percent.

In addition to making the current Mercedes-Benz SUV models, Alabama will add production of nearly 20 percent of the future C-Class volumes, Daimler said.

Roughly 10 percent of future C-Class production will be built in Mercedes' South African plant of East London, where the model is produced for right-hand drive markets.

Another 10 percent will be built at Beijing Automotive's (BAIC) site in China.

By comparison, about a half of current C-Class production is in Bremen, while another third comes from Sindelfingen. The rest is built in South Africa and China.

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