By Neetha Mahadevan

FRANKFURT--Daimler AG (DAI.XE) said Wednesday it is investing about 1 billion euros ($1.06 billion) this year to modernize its Mercedes-Benz Untertuerkheim plant in Stuttgart.

The move will lead to cost savings amounting to hundreds of millions of euros up to 2020, the company said in a statement.

As part of its Mercedes-Benz 2020 growth strategy, Mercedes-Benz plans to significantly increase production volumes in the medium term, providing stable employment at the Untertuerkheim plant in the future.

"The plant will thus receive investments amounting into the billions over the next few years for the realignment and modernization of our production," said Peter Schabert, site manager at the Untertuerkheim plant.

Write to Neetha Mahadevan at neetha.mahadevan@wsj.com

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