AM General to Build Mercedes-Benz SUVs in Indiana

Daimler AG has signed a deal with AM General to use an Indiana plant to build Mercedes-Benz R-Class models, a move coming in response to growing demand among U.S. buyers for luxury vehicles and SUVs.

The agreement, announced Tuesday, will enable Daimler to expand light-vehicle production activities beyond its plant in Tuscaloosa, Ala. AM General, known for its military vehicles, has built vehicles for other auto makers in the past, including General Motors Co. and Ford Motor Co. Its assembly plant is in Mishawaka, Ind.

Mercedes plans to expand production in its Tuscaloosa plant to about 300,000 vehicles this year. The deal with AM General allows the Stuttgart, Germany-based auto maker to move production of its R-Class crossover to a contract manufacturer and free up capacity for other SUV models.

"With the introduction of the new GLE Coupe and the continuing strong demand for SUVs, Plant Tuscaloosa needs all available production capacities for this segment," said Jason Hoff, President and CEO of MBUSI, the company's U.S. sales division, in a statement.

Mercedes will use the additional capacity in Tuscaloosa to produce its M-Class, GL-Class, and the new GLE Coupe, which is due out in the summer.

AM General expects to start producing R-Class crossover wagons this summer in Mishawaka, and said in a news release it will hire and train hundreds of new workers. The workers likely will be represented by the United Auto Workers union, which doesn't represent Mercedes workers in Alabama.

It is not the first time Mercedes has used a contract manufacturer. The company outsources manufacturing of its A-Class compact car to Valmet, a Finnish manufacturer. Mercedes has also contracted manufacturing of its E-Class models to Magna Steyr AG, the Austrian unit of Canada-based Magna International Inc.

"We are thus increasing flexibility and continue to improve our competitiveness," said Markus Schafer, a Mercedes-Benz Cars board member in charge of manufacturing and supply chain management, in the statement.

Write to John D. Stoll at [e-mail] and William Boston at [e-mail]

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