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March 22, 2010

EXCLUSIVE: BRAZIL: Mercedes may build A-class again

Once more to the breach - it is looking increasingly likely a version of the Mercedes-Benz A-class may again be built in Brazil after the unsuccessful attempt in the late 1990s.

Once more to the breach – it is looking increasingly likely a version of the Mercedes-Benz A-class may again be built in Brazil after the unsuccessful attempt in the late 1990s.

The news was let slip in an informal chat between Brazilian journalists and Phillip Schiemer, VP marketing, Mercedes-Benz cars, at the Geneva motor show earlier this month. Until the end of 2009 Schiemer headed Mercedes sales in Brazil.

The future of the 11 year old Juiz de Fora (Minas Gerais state) car manufacturing plant, now sole global source of the three-door CLC sports hatchback, has long been in question. Last year, only about 20,000 units were produced there.

The plant was opened in 1999 to build the first generation A-class and there once even was talk of 100,000 a year, the industry benchmark volume often used to justify a new stand-alone car plant. Current capacity is 70,000 a year but, as just-auto reported in 2005, only 63,436 A-class left the line from the start until production ended on 15 August that year. Launched at a time of economic woe in Brazil, the pricey A-class was out of the reach of most small car buyers and never achieved its potential.

Recent rumours have suggested the Mercedes plant might be sold, possibly to a Chinese firm.

“Although any proposal will be assessed, the unit has less excess capacity now. Today I would say there are fewer doubts about its future. I dare say that the plant might get a second chance. Perhaps a high-volume model to make use of its full capacity,” Schiemer said in Geneva.

After some prodding, he admitted the next generation A class may come with a number of body design variations.

“In theory, alongside the current [one box] monovolume, it is possible to develop a hatch, a SUV, a saloon, an estate, who knows, a convertible. One of these options for Juiz de Fora would be reasonable,” Schiemer added, stressing that no decision was expected for at least two years.

Though the first A-class failed in Brazil, and losses likely were substantial, the highly profitable light and heavy commercial vehicles operation would have offset that, at least partly.

Unfortunately for Mercedes, several recent years of strong performance by Volkswagen Truck and Buses (now known as MAN Latin America) dethroned the three pointed star brand from its long held leadership of the big margin heavy truck market, though it maintained its 50% slice of the bus segment.

Throughout its 52-year history here in Brazil, all M-B investments have been self-funded.

But, for the first time ever, the automaker has taken out a US$660m loan from BNDES, the federal investment bank, to boost production from 65,000 to 75,000 units a year at its commercial vehicle plant in São Bernardo do Campo, in Greater São Paulo.

The company will spend another $166m on research and development in the same plant and will hire 400 engineers and medium-level technicians.

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