Global troubles plague Mercedes' Ala. plant

Mercedes M-class crossovers roll down the line at the Vance, Ala., plant.
Mercedes-Benz's U.S. purchasing chief stood before a packed room of nervous suppliers in Alabama in November and reminded them of a painful fact: The automaker's factory there is the sole Mercedes plant worldwide that builds only SUVs.

"Don't panic because we're building sport-utilities," Tom Waggoner, manager of purchasing and material supply for Mercedes-Benz U.S. International Inc., told the crowd. "We have a plan."

So far, that plan includes laying off temporary workers, eliminating Friday shifts, offering buyouts to nearly all 4,000 employees and extending the Vance, Ala., plant's two-week winter shutdown by a month.

Overseas struggle
Sales of the 3 Mercedes vehicles built in Vance, Ala., have struggled more abroad than in the United States. Here are 2008 results through November, the latest period for which data are available.
 Sales Through Nov. '08% Decline
United States59,9427.8
Overseas*62,97925.7
*Covers 50 major markets outside the United States, mainly in Europe. Vance exports to 135 countries.
Source: Automotive News Data Center, JATO Dynamics

Global woes

U.S. 2008 light-vehicle sales were the worst in 16 years, with SUVs hit particularly hard. But Mercedes' problem is not the United States. The plant exports about 65 percent of its output to 135 countries. That diversification has backfired. While U.S. sales of vehicles built in Vance held up relatively well last year, overseas sales tanked.

Vance is thus a down-home reminder that lousy vehicle sales are not just a U.S. problem but a global one.

Take the M class, Vance's anchor vehicle. In 2008, U.S. sales of the M class edged up 1.3 percent to 34,320 units. The M class is one of the few bright spots in the premium crossover segment, which saw sales drop 16.5 percent last year.

But in overseas markets, M-class sales fell 24.2 percent through November, the latest month for which statistics are available, says market researcher JATO Dynamics Inc. JATO's analysis includes 50 countries outside the United States, primarily in Europe.

It's a similar story for the GL class, the latest addition to Vance's lineup. U.S. sales of the full-sized SUV fell 11.6 percent to 23,328 in 2008, much better than the segment's 26.5 percent slide.

Yet outside the United States, GL-class sales tumbled 35.6 percent, according to JATO. Taken together, overseas sales of the three models produced in Vance dropped 25.7 percent through November.

R-class sales are much weaker, but even counting them, U.S. sales aren't behind the production cuts, says Ernst Lieb, CEO of Mercedes-Benz USA, the company's sales arm.

Designed for America

"Sales in the United States are holding up, and the M class is currently up," he says. "There is a worldwide slowdown and uncertainty. If you look at the major markets — the U.K., Italy, Spain and Germany — they are down."

When Mercedes opened the Alabama factory in 1997, the plan was to serve the United States with a product designed for American customers — the M class — and export the remainder. But SUVs' popularity exploded in other parts of the world.

In 2007, Mercedes exported about 65 percent of the 174,356 vehicles built in Alabama. Production totals for 2008 won't be released for a few more weeks, but a Mercedes spokeswoman says the percentage of exports is relatively unchanged.

Mercedes isn't satisfied with how its Alabama-built models are selling in the United States, though. The last few months of 2008 were particularly bad, Lieb says. In 2009, Mercedes wants sales to at least stay level, he says. "With the M and GL, there may even be an opportunity to do better."

Diana T. Kurylko contributed to this report

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