Mercedes hires Valmet to build more A-Class cars

* Daimler has 40,000-plus orders for new A-Class

* Compact cars key to Mercedes closing gap on BMW, Audi

FRANKFURT, July 24 (Reuters – Daimler has
awarded independent Finnish car manufacturer Valmet Automotive a
contract to build more than 100,000 of its Mercedes-Benz A-Class
compact cars from 2013 to 2016, the German automotive group said
on Tuesday.

Daimler has received more than 40,000 orders for the
A-Class, a volume model critical to its plans to close the gap
with larger rivals BMW and Audi, it said.

«Our new compacts are so popular with our customers that the
Rastatt and Kecskemet plants are completely utilised. We signed
Valmet as an experienced production specialist who will provide
us with additional A-Class capacity as of 2013,» Mercedes
production chief Wolfgang Bernhard said in a statement.

Daimler said last week that it would invest a further 600
million euros ($727 million by the end of next year in its
Rastatt plant in Germany and add a third shift in October.

Bernstein analyst Max Warburton argues that it was Mercedes
decision not to enter all market segments that has contributed
primarily to its weak volume gains relative to BMW and Audi,
forcing it to rely on higher sales of its existing models.

«Incremental models account for only 15 percent of Mercedes’
growth over the past three years, versus BMW at over 90 percent
and Audi at 115 percent,» he wrote in a note earlier this month.

The need to outsource some production to third-party
contractors such as Valmet highlights the significant split in
the industry between the successful German premium brands and
their mass-market European peers, which are suffering from too
much spare capacity.

Whereas PSA Peugeot Citroen and General Motors
have each said that they aim to close a plant in Western
Europe, BMW is in talks with Netherlands-based manufacturer
NedCar to build premium Mini subcompacts in addition to two Mini
models already built by Magna Steyr in Graz, Austria.

Valmet Automotive, which also makes the Fisker Karma
electric vehicle and is 60 percent owned by Finnish conglomerate
Metso, said that the new contract with Daimler will
allow it next year to call back 300 to 400 employees who had
been laid off temporarily. It also hopes to be able to hire
hundreds more new employees from 2014.

«We are very excited to manufacture for one of the world’s
most recognised automotive brands,» Valmet President Ilpo
Korhonen said.

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