'Slow' South Africa could lose Mercedes contract

Mercedes-Benz SA (MBSA) is facing a serious challenge from China, the US and possibly other countries over the contracts to produce the successor to the C-Class. 

Hansgeorg Niefer, MBSA’s president and chief executive, said yesterday it would be “extremely difficult” for MBSA and East London if the company was not awarded the contract to produce the successor to the C-Class. 

However, Niefer stressed: “I am not prepared to make a plan B as long as plan A is realistic.”  Niefer said a decision on the locations to produce the successor model would be made in about three to four months but MBSA still needed clarity about some small issues surrounding the new Automotive Production and Development Programme (APDP).

Niefer expressed confidence that clarity would be obtained from the government.  He admitted it would be “extremely tough” for MBSA to make the case for its East London plant to be awarded the contract without a commitment from the government. 

Niefer said a decision had been made by Mercedes-Benz that it wanted to produce the C-Class outside Germany and closer to the relevant markets. 

“That is why China and the US are also now considered potential locations for the C-Class,” he said.  Mercedes-Benz’s plant in China started production last year and Niefer admitted it could hurt MBSA if this plant started exporting.

He said MBSA would also no longer export C-Class models to the US if a decision was taken to produce the C-Class there.  He said MBSA had some advantages over China, including its track record of building high quality cars over many years.

Niefer said quality was a big challenge for China but had no doubt the country would quickly improve its quality. But China is a huge market with low production cost, as opposed to slow-moving South Africa that is dependent on exports. 

The skills shortage and the additional costs of doing business in South Africa – including Eskom’s tariff increases and lack of security of supply of electricity – were major obstacles in producing vehicles here, he said.

Source:  www.thestar.co.za, 20100303

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