US: Daimler spends $2b on Mercedes-Benz site in Alabama as demand rises

Bloomberg News (Berlin) - Daimler AG (DAI), the world's third- largest maker of luxury cars, said it will spend more than $2 billion to boost capacity at Mercedes-Benz's U.S. plant. 

Production is already close to capacity at the factory in Tuscaloosa, Alabama, which makes M-, R- and GL-Class SUVs and is due to add Mercedes' best-selling C-Class sedan from 2014.

"German luxury-car makers are blessed with unbelievable demand, especially for SUVs," said Frank Schwope, a NordLB analyst in Hanover, Germany, who recommends buying Daimler stock. "Facilities often fail to meet output requirements."

Booming demand for German cars in China and the U.S., the world's two biggest auto markets, shows no signs of abating. Bayerische Motoren Werke AG (BMW), the luxury leader, sold 61 percent more vehicles in China in the first half even as growth overall car sales growth in the country slowed to 5.8 percent.

BMW has said it may add production capacity in Brazil while it expands in China and India to keep pace with demand. Porsche AG plans to boost output of the Cayenne SUV, its best-selling vehicle, at its Leipzig, Germany-based factory by as much as 20 percent to trim waiting times.

Six-month sales at Mercedes rose 9.7 percent to a record 611,000 as the unit, vying with Volkswagen AG (VOW)'s Audi to close the gap on BMW, seeks to outpace growth in global markets it reckons may reach 7 percent this year. The Tuscaloosa plant produced more than 125,000 autos last year.

Unprecedented Investment

The Alabama site, founded in 1995 and Mercedes' first production facility outside its German home market, will be upgraded and expanded after 14 years of M-Class output which "clearly surpassed" all expectations, Markus Schaefer, the factory chief, said in a statement.

The investment announced today is unprecedented for the site, Daimler spokesman Sebastian Wahle said by phone.

Stuttgart, Germany-based Mercedes-Benz is also building a factory in Hungary to produce a new version of the B-Class compact, the first of four small cars being introduced to help lower average emissions and attract younger drivers.