UPDATE: Daimler Boosts Investment for Revamped Mercedes-Benz A-Class

Date : 07/16/2012 @ 7:06AM
Source : Dow Jones News
Stock : Daimler AG NA O.N. (DAI)
Quote : 69.14  0.92 (1.35%) @ 12:30PM
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UPDATE: Daimler Boosts Investment for Revamped Mercedes-Benz A-Class

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-- Rastatt plant to produce new Mercedes-Benz A-Class SUV

-- New-generation A-Class designed to attract younger customers

-- CEO says global demand remains strong despite declining markets in southern Europe

(Adds comments, detail)

By Christoph Rauwald

RASTATT, Germany--Daimler AG (DAI.XE) said Monday it will invest an additional 600 million euros ($735 million) in its plant at Rastatt, Germany, by the end of next year for the new generation of its compact Mercedes-Benz A-Class and will add a third shift there as of October amid encouraging order intake.

It added that global demand for its premium cars remains strong despite declining markets in southern Europe due to economic uncertainty and tough austerity measures.

"Globally, demand continues to be very good, despite the difficult market situation in southern Europe," Daimler Chief Executive Dieter Zetsche told reporters at a press conference on the start of production of the revamped A-Class.

The new-generation A-Class model is a cornerstone of Mercedes-Benz's plan to ramp up its presence in the compact car segment and boost sales to catch up with German rivals BMW AG (BMW.XE) and Volkswagen AG's (VOW.XE) Audi brand. Mr. Zetsche said the company received more than 40,000 orders for the new A-Class model since it officially went on sale in June.

Daimler faces fierce pressure from analysts despite enjoying record car sales at its core Mercedes-Benz brand, because BMW and Audi are selling more cars and reaping higher profit margins. Mr. Zetsche, however, reiterated that Mercedes-Benz will fight back and aims to regain the crown in the lucrative premium-car segment by 2020. The global luxury-car segment has been largely unaffected from the woes embroiling the more price-sensitive mass-market segment in western Europe as demand in China and North America continues to surge.

The revamped A-Class features a more sporty design than its predecessor to lure younger customers to the brand. Many young car buyers have shunned Mercedes-Benz in recent years and opted for cars made by BMW or Audi, which made significant inroads into the compact-car segment with the BMW 1-series and the Audi A3 models.

Mr. Zetsche confirmed that a sport-utility version will be added to the product lineup of the A-Class, in addition to the hatchback and a four-door coupe. Daimler said earlier there will be five different versions of the A-Class in the future, but company executives have indicated that there might be more to come.

Mercedes-Benz production chief Wolfgang Bernhard said that preparing production of the new SUV, which is due to start at the end of 2013, accounts for a large chunk of the additional investment at the Rastatt plant. Rastatt will be the only plant to produce the A-Class SUV.

Earlier this year, Mercedes-Benz opened a new plant in Kecskemet, Hungary, for the production of its new generation of compact A- and B-Class models to benefit from relatively low labor costs. Daimler also plans to start production of its compact cars in China as part of its expansion plan in this segment.

Write to Christoph Rauwald at christoph.rauwald@dowjones.com

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