Mercedes-Benz to implement new architecture-based production system; Daimler open to further Aston Martin talks

Mercedes-Benz will invest more than EUR3 billion (USD3.87 billion) in implementing a new production system for its passenger cars operations. The new system will be known as Mercedes-Benz Operations (MO), with a focus on global production networks and centralised responsibility for logistics and quality. Commenting on the changes, Mercedes-Benz Cars board member for production and supply chain management Markus Schäfer said, "Under our previous production structure, the individual plants operated largely autonomously. Now, manufacturing will be organized according to product architectures, independent of individual locations." These architectures will comprise the rear-wheel drive architecture (MRA), the front-wheel-drive architecture (MFA), sport utility vehicles (SUVs; MHA) and sports cars (MSA) as well as the powertrain architecture (MPA). The MRA production network (S-, E-, C-Class) will be headed up by Andreas Kellermann, who was previously head of the Bremen plant. Michael Göbel will lead global compact car production (A-, B-Class, CLA, GLA), having previously overseen roadster production in Bremen. Production of SUVs (M-, R-, GL-, and G-Class) and sports cars (SL, SLK) is the responsibility of Jason Hoff, who retains his current role as President and CEO of Mercedes-Benz's US plant in Tuscaloosa, Alabama.. Peter Schabert, who has been responsible for global powertrain production since 2010, will continue in his position.

The new system will be implemented across both domestic and global production operations, with company investing EUR3 billion in its domestic production network in this year alone. At the company's main German plant in Sindelfingen, around EUR1 billion will be invested in order to support the production of future models. Another EUR1 billion goes to the Untertürkheim core plant for the expansion of engine production. The Bremen plant's capacities will be increased at a cost of around EUR750 million. Further investment also goes to the Rastatt compact car plant, where the fully electric B-Class electric drive has been seamlessly integrated into series production. The new system will base different vehicle variants on the same architecture and they will be built on the same assembly line, with factory tooling and equipment being used for several vehicle generations and flexible output dependent on demand. The move to standardise and modularise the company's production network is intended to cut capital expenditure costs and maximise supply chain efficiencies. "It is essential that we achieve continuous improvement in all disciplines and raise our productivity," said Schäfer.

Meanwhile, Daimler CEO Dieter Zetsche has said that his company is open to more talks with Aston Martin over further future collaborations following the appointment of former Nissan executive Andy Palmer as CEO. Palmer previously persuaded his bosses at Nissan to take a stake in Aston Martin and it is likely that Palmer will push for closer ties between the two firms. In a Reuters report, Zetsche said, "It's now up the new CEO to further develop Aston Martin's strategy. We're fundamentally open to all talks".

Outlook and implications

This new production that Mercedes-Benz cars is moving to is an intelligent and rational reorganisation along the four-platform system, which should maximise, production, purchasing and logistics synergies and result in improved economies of scale at individual plant locations. The move will work as part of Mercedes-Benz cars' "Fit for Leadership" programme to lower costs and improve overall efficiency as it looks to close the gap on the financial performance of its two main rivals. Given the move across the industry towards modular platform systems on which multiple different model lines are produced, it makes sense to align production operations with these modules rather than along the lines of physical plant locations and this move is only likely to benefit Mercedes-Benz and Daimler's long-term profitability. Meanwhile, Andy Palmer's appointment as CEO of Aston Martin may have a profound impact on the relationship of Daimler's relationship with the sports carmaker. The two firms already have close ties as a result of Daimler's stake in the company and it is likely that Palmer has been brought in by Aston Martin's owners Kuwait's Investment Dar and Italy's Investindustrial to facilitate closer ties between the two companies with the end goal of an eventual sale to Daimler. Given the comments of Daimler's CEO, further discussions between the two companies and further collaboration in the short and medium term appears likely.