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Daimler Considers Mercedes-Benz Production in Russia as Ford Cuts Jobs

April 3, 2014

Daimler is now considering building Mercedes-Benz cars in Russia as part of its global expansion, as it aims to become the best-selling luxury automaker in the world.

“We have been looking at the basic parameters and potential of local production of passenger cars in Russia and have held various discussions,” the German automaker said in a statement.

Daimler did not reveal other details, such as the companies it is in discussions with. It also did not provide a timeline for Russia production.

The automaker is planning to expand production in order to meet 2020 growth targets, as well as to manufacture more vehicles in close proximity to the markets where they will be sold. Chief Executive CEO Dieter Zetsche wanted the brand to surpass rivals BMW and Audi to again hold the global luxury sales leader title. Daimler was unseated by BMW in 2005 and kept in second place by Audi in 2011.

Despite slow growth, the Russian market remains appealing due to the fact that there are less cars in the country. Russia has less cars per capita compared to Germany, which is the largest auto market in Europe. In 2013, there were 2.78 million cars sold in Russia, a country of 142 million residents. Meanwhile, 2.95 million cars were sold in Germany, home to 80 million people.

Strong sales also make Russia a good choice for Daimler. Mercedes-Benz did well in the country last year. Based on the data from the Association of European Businesses, the brand sold more cars than the competition with total sales of 44,376 units in 2013. BMW placed second in luxury sales with 42,071 units while Audi was in third place with 36,150 units.

Vedomosti, a Russian business daily, reported that Daimler was in talks with some potential partners. At present, the German automaker has two partners in Russia. It has an 11 percent stake in truckmaker Kamaz and is in partnership with GAZ for the production of Mercedes Sprinter vans.

While Daimler is thinking about production in Russia, Ford is downsizing its labor force in the country. The Detroit-based automaker’s Russian joint venture will be cutting 950 jobs at two production plants due to falling ruble as well as declining demand in Russia.

The factory Ford runs in partnership with Sollers, which is located near St. Petersburg, will let go 700 employees as it eliminates one work shift in June. Meanwhile, the Ford-Sollers facility in Tatarstan region will let go 250 temporary workers.

The automaker also announced that the manufacturing at the St. Petersburg factory will be halted for more than four weeks until single-shift operation starts at the paint shop and final assembly hall on June 9th. The St. Petersburg plant manufactures the Focus compact and the Mondeo midsize sedan.

Meanwhile, Ford plans to add production of the EcoSport SUV at a third Russian facility operated by the Sollers venture. This is slated sometime in the latter part of the year.

According to the automaker, its sales in Russia has declined through February, posting a 21 percent decrease to 10,556 units.

Photo credit: Nicole Yeary/ Flickr/ CC BY

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