In 2009-2010, Daimler To Invest 3 Bln EUR In German Factories

Daimler AG, the world"s second largest luxury carmaker, is planning to invest 3 billion EUR (4.5 billion USD) in its factories in Germany with a view to expand the portfolio of compact models.

"We continue to invest in our locations in Germany, around 3 billion EUR in the years 2009 and 2010 alone," Daimler Chief Executive Officer Dieter Zetsche announced.

Best known as the manufacturer of the Mercedes-Benz automobiles, Daimler will increase body-production capacity as part of a 600 million EUR investment plant to expand the factory in Rastatt, Zetsche further said.

Daimler"s plant in Rastatt has been producing the compact A-Class and B-Class models since 1997 and 2005, respectively. It employs about 5,700 staff, making around 252,000 vehicles a year. Daimler will start producing the new-generation of the A- and B-Class cars in Rastatt from the end of 2011.

Last week, the German automaker laid the foundation stone for a new plant for the A-Class and B-Class in Kecskemet, Hungary. Daimler is planning to invest some 800 million EUR in the new factory in Hungary, which will employ some 2,500 staff and manufacture cars in cooperation with the factory in Rastatt.

Daimler"s decision last year to build a new factory for its compact cars in Hungary in order to benefit from lower labor costs had raised concerns among German unions that jobs and capacity could be shifted away from Rastatt.

Improving the cost structure and profit margins of compact cars, which are usually less profitable than large cars, has become a key issue for automakers amid a broader trend among consumers toward smaller vehicles.

Daimler has also set out to cut costs by over 4 billion EUR this year. After nine consecutive months in the red, the carmaker had a profitable Q3/09 amid rising demand for the high-end Mercedes-Benz E-Class sedan.

The group"s operating profit totalled 470 million EUR in the third quarter of the year, nearly 38 per cent less than in the corresponding period of 2008.