BAD CANSTATT, Germany - Last year's merger between Daimler-Benz and Chrysler Corp. did not take care of one critical problem: The corporation is running out of room to build Mercedes-Benz cars and trucks in Europe.
World demand for the products continues to rise. This year, Mercedes expects to sell about 950,000 vehicles worldwide. The automaker believes it could sell another 50,000 to 100,000 - if it could only build them.
But the problem is a uniquely European one: Mercedes remains heavily reliant on cramped German factories that are full to capacity. Even as it ventures out into new markets, with factories in the USA, Brazil and South Africa, the bulk of its sales still comes from pressurized car factories in Bremen, Sindlefingen and Rastatt, Germany. And its sprawling engine and transmission center in Unterturkheim is at capacity - as is its recently-expanded engine plant down the road in Bad Canstatt.
'We don't have enough capacity,' says Bad Canstatt engineer Werner Emele, who shows visitors around the engine plant. Opened in 1996 to build 900 engines a day, Bad Canstatt had to expand in 1998 to 1,400 engines a day. Earlier this year, it expanded again to 1,750 a day. 'It was not planned,' Emele says. 'We cannot go higher now. It is not possible.'
Now DaimlerChrysler is relying on productivity enhancements to squeeze out more production wherever it can get it.
In May, Daimler began building M-class sport-utilities at Steyr-Daimler-Puch in Graz, Austria, the production house owned by Canadian supplier Magna International Inc. That will give the brand 30,000 additional M-classes a year to supply Europe, where customers are still waiting up to eight months for delivery.
At Sindelfingen - which turns out 750,000 cars a year - high-volume C-class car production is being held up because the cars have to wait in body-welding line behind E-class cars. Next year, Mercedes will give the C-class its own automated welding plant to accelerate progress by about three hours per car.
The big plant is also preparing to rip out some of the world's largest stamping presses because they are just too slow.
Two years ago in Bremen, the automaker began investing some $2.5 billion to expand capacity and improve efficiency by 2001. About 16,000 workers will turn out 230,000 cars this year, including the CLK, SLK, SL, and C-class sedan and wagon. Though the plant is boxed in to its current size, engineers are currently altering the plant layout to squeeze out another 50,000 cars a year by 2002. That extra capacity will be turned over to the CLK convertible, currently being produced by Karmann.
Mercedes is also pushing for more output from its newer plants. At the M-class plant in Vance, Alabama, Mercedes-Benz US International Inc. recently boosted capacity from 65,000 sport-utilities annually to 80,000 a year.
Mercedes has operated a kit-assembly plant in South Africa for several years. But next year, that plant will begin full production of C-class cars for right-hand-drive markets. The plant will yield as many as 40,000 cars a year.
The Mercedes A-class plant in Brazil launched production in February and is still in the process of ramping up - but there are already demands on that rising output. A Mercedes executive said earlier this year the company intends to bring the A-class to the USA, probably in 2004.
Sales in the USA have been garnering headlines. But the double-digit annual growth there is part of a wider trend for the brand. North American sales rose 40 percent in 1998 to 183,000 units. But in Germany, where Mercedes-Benz dominates even the taxi-cab business, sales were up 28 percent last year to 355,000 units. Elsewhere in Europe, Mercedes sales rose 42 percent.