Daimler downgrades role of Mercedes factory chiefs

By Edward Taylor

STUTTGART (Reuters) - Daimler is to step up cost-saving efforts by changing the way it makes Mercedes-Benz cars, shifting away from a manufacturing network controlled by individual factory bosses to a leaner system centred around vehicle design and model lines.

The Stuttgart-based company is overhauling its operations after losing ground to rival Audi , which in the past few years has overtaken it to become the world's second biggest luxury carmaker behind BMW . The latest revamp will include a 3 billion euro (2.41 billion pounds) investment in the company's German factories.

The overhaul was presented on Wednesday by Markus Schaefer, the new divisional head of production and supply-chain management at Mercedes-Benz Cars, who was thrust into his role after Andreas Renschler's defection to Volkswagen . Mercedes Benz is rethinking manufacturing because of its big range of vehicles, which makes it difficult to maintain a production system of one model per production line.

Schaefer said the ability to optimise production processes across multiple factories will help to achieve greater savings. Mercedes-Benz aims to achieve cost savings of between 5 percent and 6 percent per year, he said.

In future, manufacturing will be organised around product designs, independent of individual locations. As a result, the traditional role of the factory chief would fall away.

"The role of the individual factory chief is changing. In future, Sindelfingen will no longer have a factory chief in the traditional sense," he said, referring to Daimler's plant near Stuttgart. "Under our previous production structure, the individual plants operated largely autonomously."

Mercedes wants factories that can build different models based on the same vehicle underpinnings. By 2020, Mercedes plans to introduce 12 new models which do not yet exist on the market.

In 2007, Mercedes made an average of 1.6 different models per production line. Today it is around 3.2 models and the trend is moving in the direction of making 5 different vehicles per factory line, Schaefer explained.

The increased variety requires a higher degree of customisation, something that will lead to a lower level of automation and a greater need for flexible workers. "Humans are much more intelligent and more flexible than machines," Schaefer said. Daimler said robots were not able to make many different varieties of model.

Daimler will re-evaluate what activities will still be done in-house and what will potentially be outsourced. Factories will be adjusted to a manageable size, which Schaefer said was an annual production capacity of between 300,000 and 400,000 cars.

Daimler said four new production chiefs would now oversee responsibility for front-wheel drive cars, rear-wheel drive cars, convertibles and sports utility vehicles.

Andreas Kellerman, a former head of the factory in Bremen, will oversee production of limousines including the S-Class. E-Class and C-Class vehicles, which use the Mercedes Rear Wheel Architecture.

Michael Goebel, a former head of production for roadsters, will now be in charge of global compact car production, including the A-Class, B-Class and GLA-Class vehicles that use the Mercedes Front Wheel Architecture.

Production of sports utility vehicles including the M-Class and GL-Class, as well as of the SL roadster models will fall under the responsibility of Jason Hoff, who currently heads the United States plant in Tuscaloosa, Alabama, Daimler said.

Peter Schaubert, currently in charge of global powertrain production, will remain in his role, the company said.

A new manufacturing organisation, Mercedes-Benz Operations, will oversee globalised production networks, with centralised responsibility for logistics and quality that will help to organise plants along vehicle production modules.

The Sindelfingen plant will receive more than 1 billion euros for modernisation. The Untertuerkheim plant near Stuttgart will receive a further billion to expand engine production. The Bremen factory in northern Germany will receive 750 million euros to increase production capacity, and the plant in Rastatt near Stuttgart will receive an undisclosed amount, Daimler said.

Shares in Daimler were 1.5 percent lower by 1229 GMT (01:29 p.m. BST), versus a 1.0 percent fall in the European autos index <.SXAP>.

(Reporting by Edward Taylor; Editing by Georgina Prodhan and Jane Merriman)