Contract manufacturing has a spotty history in the automotive industry. The practice has been more popular in Europe, where companies such as Magna Steyr and Valmet have made specialty vehicles for automakers such as BMW, Mercedes, Porsche and Peugeot.
Carmakers historically have called on contract makers to build specialty vehicles such as convertibles and for leveling out production peaks and valleys. Says Hall: "The U.S. seems not to have embraced that quite as readily. We think maybe that's starting to change."
Without naming company names, Hall says: "Several people have knocked upon our doors to inquire about various projects. There's not a lot of facilities out there that have the kinds of capability we have. I think maybe this [Mercedes contract] has opened people's eyes to that fact."
AM General's services include manufacturing engineering, supply chain management, parts and kits, dealer communications, technical training and warranty administration. Hall is especially proud of the modern, three-story paint shop, which he says was a big lure for Mercedes.
Contract manufacturing has waned in recent years. As the 2008-09 recession slashed industry volumes, carmakers worldwide took capacity back in house.
That has been true even for niche vehicles such as convertibles, which incorporated complex roof designs that automakers sometimes farmed out. Companies such as Karman, Pininfarina, Bertone and Heuliez have ceased contract manufacturing.
Magna Steyr and Valmet are the only contract manufacturers currently operating with any significant volume.
Theodore points to his own experience at ASC, which saw its business shrink drastically when Chevrolet stopped producing the SSR retractable hardtop pickup in 2006.
"ASC went from a $60 million business to a $6 million business overnight," says Theo-dore, who now runs consulting business Chris P. Theodore & Associates. "The SSR was great business: 85 or 90 percent of the value added was done by ASC.
"Specialty manufacturing is a fun business, but it has its seasons. These opportunities only arise when a manufacturer is capacity-constrained" or where there is an export opportunity, such as with the R class, he says.
"I hope they fill the plant," he says, but, "I don't see it becoming a major trend."
Jay Baron, director of the Center for Automotive Research in Ann Arbor, Mich., says the growth in niche vehicle programs could fuel a contract manufacturing comeback.
But contract manufacturers are vulnerable to the industry's stomach-churning cycles because they don't make core models. They must invest in capacity without a guarantee anyone will be there to fill it.
Hall and his team at AM General know all about peaks and valleys, having seen the ebbs and flows of government military contracts.
In 2008, AM General agreed to build a vehicle called the Standard Taxi for Vehicle Production Group, the company that designed it. The vehicle was designed with a side ramp for wheelchair access. Production didn't begin until 2011, by which time the vehicle had morphed into the MV-1. (See related story, Page 36.)
Vehicle Production Group, which had secured a $50 million U.S. Department of Energy loan to build the MV-1, ceased operations in 2013 after failing to meet terms of the loan. So AM General bought the company's assets, including the MV-1 design, to build and sell the vehicle.
AM General would not say how long the R-class contract runs, except that it is "multiyear."
The MV-1 is a large, rear-wheel-drive body-on-frame van with a ramp that slides out of the side for wheelchair access. The Mercedes R class is a unibody, all-wheel-drive wagon. AM General will make the two vehicle types on one line.
The contrasting construction methods shouldn't pose a problem for AM General, says CAR's Baron.
"When you're doing low volume, you can get away with a lot of things. When you do things really slowly, you can share a lot of things back and forth," he said.
Mercedes-Benz U.S. International, the unit that manages U.S. manufacturing operations, will continue to manage the supply chain.
Body stampings will come from current Mercedes suppliers in Alabama -- Gestamp in McCalla and Kamtek in Birmingham.
"Keep in mind, all we're doing is taking a process from Tuscaloosa and transferring that here," says Hall, who worked 37 years at defense contractor General Dynamics.
Asked how AM General can meet the challenge of building its first luxury vehicle, Hall says proudly: "I've been all around the world, and nobody does it better than the people from the Midwest. While the finish on military vehicles tends to be different, that doesn't mean they're easy. The tolerances on military vehicles are just as stringent, only different."