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Daimler Will Stop Producing Mercedes-Benz Sedans in North America

By Alejandro Enríquez | Fri, 07/17/2020 - 18:35

Daimler Group, home to Mercedes-Benz vehicles, announced that sedan vehicle production in the US and Mexico will shift as the company continues its cut-costs strategy. The company deliver early preliminary figures on their 2Q20 results and are expected to be released on July 23.

"This has been a complex quarter. We took proactive decisions on costs and spending and focused intensely on working capital management. Our systematic efforts to lower the breakeven of the company by reducing costs and adjusting capacity will need to continue," said Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG. 

The companies industrial free cash flow was reported to be €$685 million (US$783.84 million), with a net industrial liquidity of €$9.5 billion (US$10.9 billion). The group also experienced an operating loss of €$1.68 billion (US$1.91 billion). The shares of the company increased by 4.2 percent on Friday. Yahoo finance reported this to be a better-than-expected performance as the quarterly loss was a pretty "respectable outcome" amid the pandemic scenario.

Following its strategy to cut costs, the production of Mercedes-Benz C-Class sedan in Alabama will stop to pave the way for Mercedes' SUV models. As for Mexico, the production of Mercedes-Benz A-Class in Aguascalientes will move on to the GLB model, Reuters reported.

Mercedes-Benz car production in Mexico is a result of a joint venture between Daimler and the Renault-Nissan-Mitsubishi Alliance in Aguascalientes which started in 2014 and saw production a year later. At the moment, former alliance's leader Carlos Ghosn and former Daimler CEO Dieter Zetsche, announced the joint venture manufacturing complex, COMPAS, in Aguascalientes which produces premium vehicles for both Mercedes-Benz and Infiniti, Nissan's premium brand. COMPAS is owned 50/50 by both automotive groups and required a total investment of US$1 billion.

The company will also conduct staff cuts that will save a target of E$2 billion (US$2.29 billion) in annual savings. This will be equivalent to 20,000 jobs according to Handelsblatt newspaper. Daimler plant in Iracemapolis in Brazil might be put on sell and the company's operations in Keskement, Hungary will not be expanded as planned. 

Daimler continues to bet on mobility and connectivity. Its mobility division reported a preliminary adjusted EBIT of €$258millon (US$295 million). For Mexico Automotive Review 2019/2020, President and CEO of Mercedes-benz México, Jaime Cohen, said that EV will play a greater role in the company's strategy. "Electrified cars will play an increasingly important role in Mercedes-Benz’s global product portfolio. While we believe there will always be a place for combustion engines in our lineup, EVs will have a greater presence as electrification becomes more relevant. In Mexico, Mercedes-Benz has launched some mild-hybrid and hybrid vehicles and plans to launch fully-electric cars by 2020," said Cohen.

You can read Jaime Cohen's full interview here

Photo by:   Daimler AG
Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst