Daimler Inaugurates Hungarian Plant, Will Add 4-door Coupe

KECSKEMET, Hungary – Mercedes-Benz Mfg. Hungary launches production at its new vehicle plant here.

The Kecskemet facility is producing two of the five models coming from Mercedes’ front-wheel-drive architecture that will underpin the new-generation A- and B-Class models.

Daimler has invested €1.4 billion ($1.86 million) in production of the new cars, including €800 million ($1.06 billion) to construct the Kecskemet plant and €600 ($800 million) to expand its Rastatt, Germany, facility.

Volume production of the B-Class, the first product in the new generation of Mercedes compacts, began at Kecskemet in March. Serial output of the B-Class launched at Rastatt in September.

Joint output of the B-Class in Rastatt and Kecskemet enables flexible and optimum management of the plants’ capacity utilization, Daimler says. This volume flexibility is a key factor in the economic efficiency of the Mercedes’ manufacturing network.

“With the production network of the Rastatt and Kecskemet plants, we now have the capacity to meet the demand from many existing – and new – customers in the premium-compact segment,” says Daimler CEO Dieter Zetsche, who was joined by Hungarian Prime Minister Viktor Orban for the inauguration of the Kecskemet factory.

The second model to be manufactured in Kecskemet will be a 4-door coupe dubbed the Mercedes-Benz CLA, the auto maker says.

“(At the Beijing auto show this month), we will show the concept of what we call a style coupe,” Joachim Schmidt, executive vice president-sales and marketing, tells an investor conference in Kecskemet. “We start communicating this about one year before the real launch will happen to attract potential customers for this completely new car.”

Pilot output of the 4-door coupe starts in the year’s second half, with volume production launching in early 2013, Frank Klein, managing director-Mercedes-Benz Mfg. Hungary, tells media.

After CLA production starts, “paprika will not any longer be Hungary’s hottest export product,” Zetsche quips.

While the new B-Class is manufactured in Germany and Hungary, the 4-door coupe will be solely sourced from the Kecskemet plant located about 53 miles (86 km) southeast of Hungary’s capital, Budapest.

The facility, which is in the ramp-up phase, currently builds about 70 cars per day.

The production rate at the new factory will be one minute and 54 seconds per unit, resulting in annual capacity of about 120,000 cars in two shifts. The second shift is expected to be added in late summer or early fall.

The site offers enough space for expansion. “We have opportunities here in Kecskemet to double our capacity on the same site,” Wolfgang Bernard, Daimler board member responsible for manufacturing and procurement, Mercedes-Benz Cars and the Mercedes-Benz Vans business unit, tells the analyst conference.

Production in Hungary offers significant cost advantages over Germany, Bernard notes.

“Labor rates are roughly 70% lower than in Germany. And with lower labor rates and productivity gains that we make here in Kecskemet, we are basically able to reduce our manufacturing costs by 30% compared to what we have in Germany,” he says.

“If we had invested that plant in Germany, the degree of automation would be higher, so there are a lot of areas where we did not invest into the automation,” Bernard says. “We would put more automation there because it pays in Germany. It obviously does not pay here, so we have reduced the degree of automation (in Hungary).”

Daimler is reusing some production equipment in the new factory. For example, some robots installed in Kecskemet were employed in E-Class production at the Sindelfingen facility in Germany.

“In the past, we have thrown everything away after the model runs out. We are having smarter concepts right now,” Bernard says.

The Kecskemet facility employs 2,500 people, including 2,150 Hungarians and 350 expats from Germany.

Originally, Daimler said the Kecskemet plant would have 2,500 employees involved in full-scale production in 2013. But the auto maker now says staffing will be increased to more than 3,000 by the end of this year.

With the increased production capacity, the auto maker now can fully address overwhelming customer response. Mercedes has received more than 100,000 orders for the B-Class since its launch in November.