Saturday, 20 September 2014

Daimler invests €3 billion in German car plants

Mercedes-Benz is realigning global passenger car lines, imposing top job changes and investing in its German passenger car plants.

“We want to continue to grow and will significantly increase our production capacities in the coming years. At the same time we want to permanently and sustainably strengthen our competitiveness with a high-performance organization,” declared Markus Schäfer, member of the divisional board of Mercedes-Benz Cars, production and supply chain management.

This year, Mercedes-Benz is managing 18 vehicle ramp-ups at eight locations worldwide, among them the start of production of the new C-Class sedan on four continents. by 2020, Mercedes-Benz will have introduced 12 models “which do not have a predecessor”.As well as stepping up its international activities, Mercedes-Benz is strengthening it German plants with over €3 billion of investments this year.

At the Sindelfingen plant, over €1 billion has been invested primarily for future products. Another €1 billion goes to the Untertürkheim core plant, amongst others for the expansion of engine production.

The Bremen plant's capacity is being increased with around €750 million and further investment is headed for the Rastatt compact car plant, where the fully-electric B-Class electric drive has been integrated into series production.

A new manufacturing organization Mercedes-Benz Operations (MO) has been established based on global production networks and centralized responsibility for logistics and quality. Product architecture is the new ‘in words’.

“Under our previous production structure, the individual plants operated largely autonomously. Now, manufacturing will be organized according to product architectures, independent of individual locations,” explained Schäfer.

These product architectures comprise: rear-wheel drive architecture (MRA): front-wheel-drive architecture (MFA); architectures for SUVs (MHA); the sports cars architecture (MSA); and finally the powertrain architecture (MPA).

This has been accompanied by new jobs for some senior personnel, mainly those drawn from the Bremen plant.

For example, the MRA production network (S-, E-, C-Class) is now led by Andreas Kellermann, previously head of the Bremen plant.

Michael Göbel has been put in charge of global compact car production (A-, B-Class, CLA, GLA and in the future CLA Shooting brake), having previously been responsible for roadster production in Bremen. This is a big move up for him.

Production of SUVs (M-, R-, GL-, and G-Class) and sports cars (SL, SLK) is the responsibility of Jason Hoff, who retains his existing role as president and chief executive officer of the Mercedes-Benz plant in Tuscaloosa, Alabama (MBUSI) in the US. This suggests his responsibilities in that country have been significantly widened and deepened.

Peter Schabert, responsible for global powertrain production since 2010, clearly has his hands full and continues in his present position.

                                          System of modules

Each vehicle and powertrain architecture will draw on a system of modules and components.

The new C-Class, for example, is the first model series to be built entirely in accordance with this principle. The C-Class is Mercedes-Benz's highest-volume model series and went into production on four continents within six months earlier this year. Bremen launched first in February, followed by the East London plant (South Africa) in May, the Tuscaloosa plant (USA) in June, and the BBAC plant in Beijing (China) in July.

Within the global production network, Bremen is the lead plant and manages all aspects of C-Class production from the tooling strategy and quality assurance to the training of workers from other sites worldwide.

The company aims to ensure the highest standards are met at all production sites from the outset. Some 500 employees from plants outside Germany have received intensive training so that, as multipliers, they can pass on their knowledge within their home plants.

“Our German passenger car and powertrain plants form the backbone of our global production network. The achievements of the teams in all four plants are second to none: they have done an outstanding job in launching the C-Class at four sites in such a short space of time,” claims Schäfer.

Ensuring every production facility delivers the high quality synonymous with the brand is just one aspect of the redefined quality management function.

“Our quality remit covers every area of Mercedes-Benz Cars, from product development to customers,” said Schäfer. He believes that providing innovative manufacturing processes is also a part of quality management: “It means our designers and developers are able to launch exceptional vehicles that are equipped with leading technologies.”

Another factor is seen as centralized supply chain management, in which all stages of the supply chain must be seamlessly integrated, from the supplier through to the end customer. However, everything is not perfect.

“We still face great challenges in this field, at the same time there is also huge potential for reducing costs and increasing efficiency,” explained Schäfer.

Daimler claims that global production networks bring Mercedes-Benz closer to the different markets and customers and enable it to respond more quickly to changes in demand, because production can be adjusted in individual plants.

At the same time, manufacturing in other currency areas enables exchange rate volatility to be evened out. Significantly, Mercedes-Benz does not manufcature in the UK, one of its biggest markets.

“Given the expanding range of models, steadily increasing unit figures, and greater complexity than ever before, we must become significantly more flexible,” said Schäfer.

This includes having different variants on the same assembly line, factory equipment being used for several vehicle generations, and working hours that can be varied according to demand.

By standardizing and modularizing its plants, Mercedes-Benz intends to contain the level of capital expenditure needed and reduce fixed costs.

“It is essential that we achieve continuous improvement in all disciplines and raise productivity,” added Schäfer.

The expansion of alliances, establishment of joint ventures, and use of capacity at contract manufacturers continues to play an important role in Mercedes-Benz's growth strategy.

At the end of June, Daimler announced that it was setting up a production joint venture with the Renault-Nissan alliance, stepping up their existing cooperation.

The partners intend to build a new generation of compact cars at a new factory in Aguascalientes, Mexico, which will have a total annual production capacity of 300,000 units.

Schäfer focuses on transparency and a collaborative working relationship across all hierarchy levels, both throughout the company and in his own organization.

“A high-performance organization depends on the motivation of all employees. The human factor makes the difference,” he noted.

                                                 Safeguarding jobs

As to the outlook for German plants, Schäfer declared: “We continue to invest in Germany and thereby safeguard jobs.”

“At the same time, each site needs to be internationally competitive in its own right,” he added, citing the most recent example of the Sindelfingen plant, where in July Mercedes-Benz negotiated a package with the works council. Along with investments totalling €1.5 billion, it included necessary cost optimization measures, ensuring the site's future viability.

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