Among the three German premium brands on sale here in Brazil, Mercedes has been enjoying the greatest growth.

The volume of fully imported vehicles doubled between 2005 and 2008 while, in the first five months of 2009, sales rose 35% year on year. Mercedes now looks like closing this year with a sales tally in the vicinity of 5,000 units.

Nonetheless, its Juiz de Fora (state of Minas Gerais) plant is cutting production of the most affordable Mercedes - the C class coupe. The Brazilian plant is now sole company factory building the CLC for global sale - it previously built the first generation A-class - from 1999 through 2005 - and has also assembled C-class models from CKD kits for export to North America.

Last year almost all the 28,000 CLCs built in Brazil - with less than 40% local content - were exported (local sales are symbolic; 600 units forecast for this year). That, incidentally, was the largest number of cars ever produced in a single year at Juiz de Fora.

But, with sales in international markets weakened by the credit crunch, the production forecast for this year is 20,000 units at most.

The US$700m plant employs 1,700 both directly and indirectly but its full 70,000-unit annual capacity (on three shifts) has never been reached.

Although a truly modern facility, it has never been profitable due to its excess capacity.

Fernando Calmon

Mercedes Brazil plant gets reprieve