The '07 S-Class arrives in showrooms this fall, and it will be the first passenger car to feature a 4Matic-brand all-wheel-drive system conceived and built by Mercedes-Benz.

The move signals a long-term trend whereby Mercedes will produce all its own AWD systems.

Dubbed internally as “Mercedes-Benz 4Matic,” the system will migrate to the E-Class and C-Class lineups, says Bart Herring, Merced-Benz USA product manager for the brand's E, C, S and CLS passenger cars.

Until now, many of the tristar brand's systems have been supplied by Magna Steyr Fahrzeugtechnik AG & Co. KG.

Ironically, Mark Hogan, president of Magna Steyr's corporate parent, Magna International Inc., has been a champion for the proliferation of AWD technology.

“It's a strong market,” Herring tells Ward's, adding AWD currently enjoys a penetration rate of about 30% in Mercedes vehicles and is on the rise.

“It's very strong, regionally. (In the Northeast), you rarely see a C, E or S that's not a 4Matic. If you're around Detroit, that's all you'll see. On the West Coast or in the Southeast, you rarely see any.”

Mercedes views this not as an obstacle but an opportunity, albeit a modest one.

“The opportunity for 4Matic is for very slight growth as people begin to appreciate the ‘non-snow’ benefits,” Herring says, referring to enhanced acceleration.

“You have a great benefit on bad pavement, in the rain, in all weather conditions.”

Mercedes officials say Magna remains a highly valued supplier.

The decision to bring the work in-house reflects available capacity at the auto maker's plant in Sindelfingen, Germany, and the fact it is simpler to integrate new technology if it is native to the company.

“It makes it easier on the manufacturing side if you can plan a vehicle, and you can plan your own system,” Herring says. “Because if you work with an outside supplier, it's going to be — typically — parts of different people's systems, customized for your application.”

The Mercedes 4Matic is lighter than the system it replaces, which affords better fuel economy.

On the '07 S-Class, the auto maker also realizes a significant packaging benefit.

“On all of our previous or current-generation 4Matic cars, the passenger-side footwell has a very small hump on the right side of it to account for the drivetrain in the front,” Herring reveals.

“With the new S-Class, you won't have that.”

Mercedes is the second auto maker to pull its AWD development in-house in recent months.

Ford Motor Co. has developed its own system for integration in its midsize cars — the Ford Fusion, Mercury Milan and Lincoln MKZ, formerly the Zephyr.

The U.S. auto maker had been making extensive use of AWD systems from Sweden-based Haldex AB.