AM General to build the R-Class for Mercedes-Benz.
Mercedes-Benz has just one assembly plant in North America, but that Alabama facility is running at full capacity. There have been rumors over the past few years that Mercedes would either expand its plant or partner with another manufacturer to increase productivity, so on Tuesday the German automaker announced its plans.
Beginning this summer, new Mercedes R-Class models will drive off an AM General assembly line not far from South Bend, Indiana. The R-Class was introduced in 2005 and was distributed across the United States through 2012. Commencing in 2013, the R-Class has been shipped to China only where the new models are also destined.
Alabama Production Constraints
The shift to Indiana will free much needed space at Mercedes’ Tuscaloosa factory. Specifically, that plant will make room for other Mercedes-Benz models, including the GLE-Class and the GL-Class. Moreover, an all-new GLE Coupe is slated for the 2016 model year and will be assembled in Alabama as well.
Jason Hoff, CEO of Mercedes-Benz U.S. International, explained that Tuscaloosa “needs all available production capacities for this segment.” Like other luxury builders, Mercedes-Benz has been working diligently to keep up with utility vehicle demand.
Mercedes-Benz expects to assemble about 10,000 units of the long wheelbase version per year; it no longer builds the standard model. The company could have transferred production to China, but many of its suppliers are in the US. Besides, the migration to Indiana will be accomplished rapidly and the relationship with AM General will span several years.
UAW Organizing Quest
The shift of the R-Class to Indiana will also mean that those laborers will be working in a union environment. At the same time, Mercedes’ Tuscaloosa plant has been under the UAW’s scrutiny for years, as the union would like to organize those workers. All Daimler facilities except for Alabama are unionized. What pressure in shifting R-Class production to Indiana will have on union organizing in Alabama remains to be seen.
In a statement issued following Mercedes’ announcement, UAW Secretary-Treasurer Gary Casteel congratulated the company and employees “on this positive new development.” Casteel added, “Investing in the future with UAW Local 5 members in Indiana is a clear signal that Mercedes-Benz and Daimler value employee representation.” Furthermore, the union represents 7,000 Daimler workers in North America and most definitely would like to organize Tuscaloosa.
AM General and General Motors
Mercedes-Benz is not the first automaker AM General has hammered out a strategic partnership with — its most recent collaboration was with General Motors. That relationship was forged in 1998 when GM purchased the Hummer brand name from AM General, which was also building the military specification Humvee.
Only the pioneering Hummer H1 was assembled by AM General for GM, with its production terminated in 2006. Subsequent H2 and H3 models were based on existing GM platforms and built at GM facilities elsewhere. GM’s attempt to locate a buyer for Hummer after its bankruptcy and reorganization failed — the brand was dissolved in 2010 as dealers closed shop.
Competitors Need Capacity Too
As Mercedes-Benz shifts R-Class production away from Alabama and to a secondary facility, it may motivate those competitors with a limited manufacturing presence in North America to do likewise.
So far, BMW has been expanding its South Carolina plant to accommodate demand, while Audi has a plant under construction in Mexico. Furthermore, Lexus is shifting ES350 production from Japan to Kentucky, and Acura is now building its NSX super car in Ohio.
Finally, Volvo wants to shift some production to the United States, but its efforts seem focused on building a new plant in the Carolinas or Georgia. Other brands seem satisfied to work with what they have, importing vehicles from home country plants or wherever excess global capacity can be procured.
***Wikipedia photo courtesy of Rudolf Stricker***