By Manoah Esipisu
EAST LONDON, South Africa, July 27 (Reuters) - "Made in South Africa" luxury Mercedes C-class sedans may soon be purring their way to the front of the pack on the streets of New York, Los Angeles and Detroit.
If American automobile executive Sam Steinmetz has his way, the Mercedes C-Class plant in East London, on the Indian Ocean, would "very soon" be producing left-hand-drive cars for the United States, the world's biggest auto market.
Steinmetz is production manager at East London, DaimlerChrysler's only C-class manufacturer outside the automobile giant's home of Germany.
Steinmetz and other executives say they want to nearly double production in East London to 80,000 cars a year from 42,000 -- and are keen that the additions be left-hand-drives.
Port capacity in East London is being upgraded to meet the upsurge in exports, port officials said.
DaimlerChrysler is keen to track rival BWM to exploit the U.S. market under the Africa Growth and Opportunity Act (AGOA), which guarantees duty and quota-free access for goods from signatory African nations to the U.S. market.
Exports to the U.S. rose 53 percent in 2003 from 2002 from the 38 sub-Saharan African countries which qualify for AGOA benefits. Congress this year extended the agreement to 2015.
In tiny Lesotho, Asian countries have invested in the textiles sector to reap AGOA dollars and the government there says the trickle down effect has created nearly 20,000 jobs.
For Mercedes, AGOA's tariff reductions mean a significantly lower cost for U.S. consumers.
TARGET US MARKET
"We would like to double production here and have the capacity to do so," Steinmetz told reporters in East London.
"Our target is the U.S. market under the AGOA arrangement. AGOA presents a unique opportunity for us.".
Multinational auto makers such as DaimlerChrysler, BMW, Volkswagen and Toyota have consolidated their positions in South Africa to take advantage of the government's motor industry development programme (MIDP) and low labour costs compared to Europe.
The MIDP aims to turn South Africa into a base for exports of auto products and create jobs -- a key priority in a country where around one in three working-age adults has no job.
Under the scheme companies involved in export programmes can import vehicles and components at lower tariffs. Components for medium and heavy vehicles, excluding tyres, are duty free.
Some 45 percent of the cars from East London are exported to the United Kingdom while Japan and Australia take in 11 percent each. The South African market laps up 25 percent with the balance sprinkled across Africa and other parts of the world.
Hansgeorg Niefer, head of manufacturing at the East London plant, said DaimlerChrysler would continue to import 60 percent of raw materials for production of C-class models, allowing enough local content for the cars to qualify as South African.
Under AGOA, at least 30 percent of a product has to be local content to qualify.
DaimlerChrysler are in the top bracket of employers in South Africa, giving their 5,590 employees in East London an average salary of 4,000 rand ($648) a month, around one fifth of the wages paid to workers at plants in Germany.
LABOUR STABILITY A PLUS FOR S.AFRICA
"Labour stability is a major plus for us and we are among the top payers in South Africa," Niefer said.
"We are very labour intensive in East London compared to other manufacturing plants, but in terms of quality we want to be judged by the same international standards of our sister operations in Germany and we are equal right now," Niefer said.
DaimlerChrysler is seeking to save 500 million euros ($607 million) in annual staff costs at Mercedes, its most profitable unit, but employee representatives have so far agreed to measures yielding only a fraction of that.
The group said in early July it might cut 6,000 jobs at the Sindelfingen plant and shift some production of the new C-class Mercedes model to other plants in Germany and South Africa.
The Germany dispute comes as pressure mounts on western European employees to work longer, take fewer holidays and do without collective wage agreements to prevent jobs disappearing to cheaper locations in less developed economies.
DaimlerChrysler is following a lead set by manufacturing giant Siemens, which in June clinched a deal with trade unions to raise working hours at two German plants to 40 hours a week from 35 without extra pay.
The company has threatened to move production of the new C-class car, due in 2007, to its more efficient Bremen plant in northern Germany and to its East London factory in South Africa as well as drop plans to build derivative models.
"If you asked, I would say that we are ready to move forward with expansion but a final decision will have to come from Germany (DaimlerChrysler AG)," Steinmetz said.
BMW manufactures some 55,000 sedans at its 3-series plant near Pretoria, and exported 41.6 percent of these to the U.S. market last year under AGOA, spokesman Clinton Yon told Reuters.
"To be competitive, we have to be aggressive and the US is the key," said Steinmetz.