SINDELFINGEN, Germany (Bloomberg) -- Daimler will spend 1.5 billion euros ($2 billion) through 2020 upgrading its largest car plant, in Sindelfingen, Germany, after employees agreed to more flexible working terms.
The Mercedes-Benz factory will generate at least 100 million euros in savings through the labor agreement, which gives the company greater flexibility to assign production shifts, especially during the ramp-up and phase-out of a model, Daimler said in a statement on Wednesday.
"The agreement combines investments for the future with the necessary savings," CEO Dieter Zetsche said in the statement. "With this package, we strengthen Sindelfingen's position and secure jobs."
Daimler will build a new body shop, paint shop and logistics center at the Sindelfingen site, as well as an additional assembly hall for the next version of the E-class sedan. The factory, with a workforce of 22,000 people, makes Mercedes's high-end S-class sedan, the CLS coupe and its wagon-like shooting brake variant, as well as the current-generation E class. Permanent contracts will be offered to 100 temporary workers, Daimler said.
The plant modernization is part of Zetsche's strategy to increase operating profit at Daimler's carmaking division to 10 percent of revenue to outpace earnings at competitors BMW and Audi by the end of the decade. Zetsche also wants Mercedes to beat the other two manufacturers in global premium deliveries by then.
Daimler reached a separate accord with employees of its German distribution network, enabling the company to sell some Mercedes dealerships in the country while excluding mass firings through 2013.