Ineos closes deal to buy Daimler factory to build Land Rover Defender rival

The British petrochemical giant Ineos has signed an agreement with Daimler to buy the German automaker’s factory in Hambach, France, where it will build the Grenadier 4x4 starting at the end of 2021.

Terms were not disclosed, but Daimler will contract with Ineos to produce the Smart ForTwo electric minicar at Hambach until 2024 as well as components for Mercedes-Benz models, the automaker said Tuesday in a news release.The deal had been in the works since the summer.

"Manufacturing at Hambach ensures that Ineos remains on track to meet its plans to deliver the Grenadier to customers in early 2022," Ineos said in a statement.

The agreement will preserve more than 1,300 jobs at the site, where about 800 people currently work in production and another 800 for suppliers and in other support positions.

Ineos is aiming for annual production of about 25,000 units of the Grenadier, a large SUV similar to the body-on-frame Land Rover Defender 110 that was discontinued in 2016.

Ineos teams plan to start work at the site as early as January, Smart and union representatives told the French website Usine Nouvelle on Tuesday.

Ineos has drawn criticism for not building the Grenadier in the UK. The company defended the decision on its Twitter account on Tuesday, saying that it had been "our intention" to build the vehicle in Britain, "but the business case for Hambach was overwhelming."

Unions at the factory approved the sale several weeks ago, despite concerns about the sustainability of building a large internal combustion engine vehicle at a time when European emissions standards continue to tighten.

Ineos may turn to hydrogen power in the future, however, as it recently signed an agreement with Hyundai to "explore the use" of Hyundai’s fuel cell technology in Grenadier vehicles.

The Hambach factory, known as Smartville in France, was inaugurated in 1997 in a ceremony attended by President Jacques Chirac of France and Chancellor Helmut Kohl of Germany.

Production reached a high of about 140,000 in 2008; in 2019 about 70,000 vehicles were built there, according to research company Inovev.

Daimler said this summer that it would seek a buyer for the factory as part of a plan to reduce its industrial footprint. The automaker said Tuesday that it had already recorded the effects of the sale in the second and third quarters. In the second quarter, Daimler booked impairment charges of about 500 million euros on the plant.

"No significant effects are expected in the fourth quarter which will weigh on the earnings of Mercedes-Benz," the automaker said.

Markus Schaefer, a member of the Daimler board of management and COO of Mercedes, said in a statement Tuesday that the sale of the Hambach plant was an "important step" in making Daimler more efficient to allow for increased investments in new technologies.

"We are investing heavily in our electric offensive and comprehensive digitalization," he said. "In doing so, we must make the company even more efficient and, in this respect, the optimization of our global production network is a very decisive lever."

The Smart brand is facing an uncertain future in Europe after Daimler said last year that would build next-generation Smart vehicles through a joint venture with Geely in China. The four-seat Smart ForFour, a sibling model of the Renault Twingo, is built at Renault Group’s factory in Slovenia.

Ineos emerged as a potential buyer for the Hambach site this summer. It was also said to be looking at Nissan’s pickup factory in Barcelona and a site in Wales.

"Hambach presented us with a unique opportunity that we simply could not ignore: To buy a modern automotive manufacturing facility with a world-class workforce," Ineos Chairman Jim Ratcliffe said in a statement Tuesday.

Daimler had invested about 500 million euros to prepare the Hambach site to build larger electric vehicles for Mercedes such as the EQB crossover. Much of that work has already been completed, including a new body shop and a new paint shop.