Daimler Plans $2 Billion Upgrade at Sindelfingen Factory

Daimler AG, the third-biggest maker of luxury vehicles, will spend 1.5 billion euros ($2 billion) through 2020 upgrading its largest car plant after employees agreed to more flexible working terms.

The Mercedes-Benz factory in Sindelfingen, Germany, will generate at least 100 million euros in savings through the labor agreement, which gives the company greater flexibility to assign production shifts, especially during the ramp-up and phase-out of a model, Daimler said in a statement distributed at a press conference at the plant.

“The agreement combines investments for the future with the necessary savings,” Chief Executive Officer Dieter Zetsche said in the statement. “With this package, we strengthen Sindelfingen’s position and secure jobs.”

The plant modernization is part of Zetsche’s strategy to increase operating profit at Stuttgart, Germany-based Daimler’s carmaking division to 10 percent of revenue to outpace earnings at larger competitors Bayerische Motoren Werke AG and Audi AG by the end of the decade. Zetsche also wants Mercedes to beat the other two manufacturers in luxury-auto deliveries by then.

Daimler will build a new body shop, paint shop and logistics center at the Sindelfingen site, as well as an additional assembly hall for a new version of the up-market Mercedes E-Class sedan.

The factory, with a workforce of 22,000 people, makes Mercedes’s high-end S-Class sedan, the CLS coupe and its wagon-like shooting brake variant, as well as the current-generation E-Class. Permanent contracts will be offered to 100 temporary workers, Daimler said.

Daimler reached a separate accord yesterday with employees of its German distribution network, enabling the company to sell some Mercedes dealerships in the country while excluding mass firings through 2013.

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