Mercedes scouting Romania, Poland for new plant

STUTTGART - Mercedes-Benz is looking at Romania and Poland in its search for an additional production site for the next generation of the A- and B-class, according to company insiders.

"The balance is rather tipping in Romania's direction," one source said. The entire business case is being argued in a "profoundly contentious" manner among senior managers, he said.

The new generation of the two subcompacts will debut as early as 2011, making decisions on the future product concept and the possible production location the hottest issue at Mercedes right now.

The next generation is supposed to enliven sales in Mercedes' core western European market as well as in emerging economies. At the same time, it is intended to help the company achieve its CO2 goals.

A third important goal: Mercedes wants to finally make a premium profit on a subcompact vehicle.

To achieve all its objectives, costs must be reduced dramatically. That's the reason the next generation likely will be based on a completely new front-wheel-drive platform and built in eastern Europe, possibly with an automaker partner yet to be identified.

In addition to the eastern Europe facility, the Mercedes plant in Rastatt, Germany, also will be expanded. It has produced the A-class since its launch in 1997 and the B-class since 2005.

The new assembly plant could be located in the Tetarom III industrial park in Jucu, in northwestern Romania near Hungary, according to a company source. That's where the Finnish mobile phone manufacturer Nokia wants to transfer the production operation that it now has in Bochum.

The mayor of Cluj, about 20 kilometers away, has acknowledged there have been discussions with Mercedes. There has been contradictory speculation about the plant's possible capacity.

In Romania, the figure of 350,000 units is circulating. In Mercedes circles, 70,000 to 130,000 vehicles have been mentioned.

Labor costs of about 3.23 euros (about $4.70) per hour act in Romania's favor. That contrasts with 6 euros ($8.70) an hour in Poland and more than 42 euros ($61) in Germany.

On the other hand, compared to Poland, significantly higher logistics costs come into play in Romania due to its poorer infrastructure. In addition, the skill level is higher in Poland.

Source: autonews.com