Romania lost out to Hungary over Mercedes' site for a new CEE assembly plant due largely to Romania's poor infrastructure, according to reports in Romanian newspapers.

"Mercedes swerves to miss Romania's pot-holed roads," was the headline on the front page of the Gandul daily.

"We've lost an investment worth almost one billion euros (1.55 billion dollars) owing to the poor state of our infrastructure," said the daily Evenimentul Zilei.

According to AFP, the deputy chief of Renault's Dacia plant in Pitesti, Constantin Stroe, who also acted as Daimler's advisor in Romania, said there were two main arguments that had finally persuaded the car maker to opt for Hungary.

"The first one is the quality of infrastructure. An investment of this scale has to be close to at least two means of transport, road and rail," Stroe told the daily in Gandul. And the Hungarian site, Kecskemet, 80 kilometres (50 miles) southeast of Budapest, had access to both.

Romania, for its part, has just two motorways, totalling 220 kilometres in length. A third, being built by US construction group Bechtel between Brasov in the centre of the country and Bors in the north east, has been subject to serious delays.

The second criterion was the proximity between plant and customers, Stroe continued. That would enable Daimler to keep a lid on transport costs. Since the Mercedes brand cars were destined for western European markets, Hungary was the better choice, he said.

The automaker will spend EUR800m on the new factory in Kecskemét, about 50 miles (80km) from the outskirts of Budapest, creating about 2,500 new jobs.

"We are planning a new plant in Hungary to boost our competitiveness and to gain access to the potential of the eastern European markets," Daimler chairman Dieter Zetsche said in a statement.

"We will now invest some EUR600million in Rastatt for our new generation of compact cars," he added.

The production network between the two plants would contribute significantly to the company's efficiency and competitiveness, Daimler said.

The company said four distinct new models are planned for its compact car segment and improvements in efficiency and structural design would ensure long-term profitability of the new vehicle generation.

"The successor generation will include product characteristics that are already popular with customers today - such as generous interior space and an elevated seating position. In addition, new vehicle variants will win additional target groups for the Mercedes-Benz brand," the automaker said.

It did not provide details but earlier media reports have said Mercedes, for cost reasons, would abandon the 'sandwich' floorpan construction of the current A- and B-class models, and engines would all come from existing line-ups.

There would be at least four variants of the new front-drive platform - a sporty three-door version, a compact SUV, a van and a five-door.

The new model is due out around 2012 and the new Hungary plant would produce at least 100,000 units, in addition to the 280,000 units built at Rastatt.

"Our expanded product range will allow us to tap into new customer groups and open up new market regions," said Zetsche.

See also: GERMANY: Hungary gets new Mercedes plant