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March 9, 2009 2:40 AM, EDT

Daimler Dedicates Mexico Plant

By Howard S. Abramson, Editorial Director

This story appears in the March 9 print edition of Transport Topics.

SALTILLO, Mexico — Daimler Trucks North America dedicated its $300 million Freightliner plant here Feb. 27, as Mexico’s president, Felipe Calderon, joined company officials to formally launch the new 1.3 million-square-foot facility.

The plant, which has begun producing Cascadia trucks made by Daimler’s Freightliner subsidiary, is capable of producing 30,000 trucks a year and comes online as the company is shutting down its manufacturing facility at DTNA’s Portland, Ore., headquarters.

Andreas Renschler, head of Daimler Trucks globally, said the new plant “is the industry’s model for modern-day truck production worldwide and our new benchmark plant.”

Renschler, who runs the world’s largest commercial vehicle maker from Daimler AG headquarters in Stuttgart, Germany, said others have questioned why DTNA would open a large new plant during the global economic slump that has sent truck sales plummeting.

The answer is that the plant, which took only 24 months from groundbreaking to the start of production, “is the right investment at the right time, in the right place with the right partners,” Renschler said. He added that the Saltillo facility would “not just export excellent trucks but also the experience” the company has gained in designing and building it.

He said the company had to be prepared for the rebound many economists predict will begin late in 2009 or early in 2010.

The plant is currently operating in what officials called “ramp-up mode,” making about eight trucks a  day. It applies some new production techniques that officials said would be adopted eventually at Daimler Truck plants around the world, such as lean manufacturing and solving defects at the production station where they occur, rather than allowing the truck to continue down the line to be fixed later, as is the usual practice in most factories.

Chris Patterson, president of DTNA and its Freightliner brand, said opening the plant here “makes good business sense” because more than 100 auto parts and processing plants have opened in Mexico in recent years. This plant is located on a large arid tract of land surrounded by the Sierra Madre Mountains, about 45 miles from Monterrey, a major manufacturing hub in northern Mexico.

The 740-acre plant currently employs about 570 workers, said Roger Nielsen, DTNA’s chief operating officer. The company expects to hire about 1,600 workers when production is at full capacity, and he said it also will foster about 1,100 jobs at supplier factories that will locate near the plant.

For now, Saltillo will produce only the Class 8 Cascadia model, but company officials said it could be modified to produce other heavy- and medium-duty models on short notice.

At a press conference after the opening festivities, Renschler said the company has “prepared, yes, but not planned” to expand Saltillo production beyond the Cascadia.

DTNA also operates a plant in Santiago Tianguistenco, about an hour’s drive away in the mountains outside Mexico City. The Santiago Tianguistenco plant, which currently produces medium- and heavy-duty trucks for export to the United States, Canada and Latin America, as well as for domestic consumption, is also capable of making 30,000 trucks a year.

Calderon said that Mexico now accounts for half of DTNA’s production capacity.

He called the Cascadia “one of the most modern trucks in the world” and said Mexico “is the appropriate place for this plant,” because the country has become a major auto and truck maker, as well as home to many other industries.

Calderon, in his speech to Daimler officials, local politicians and plant workers, said Mexico recently has adopted two programs that provide $630 million to assist vehicle and parts makers and $160 million to help companies pay the salaries of workers who otherwise would be laid off during the recession.

Humberto Moreira Valdes, governor of the state of Coahuila, which includes Saltillo, thanked a local businessman who donated the 740-acre site to the government, so it could be given to Daimler to help lure the company there. He said many regions in Mexico had vied for the plant.

Moreira Valdes also cited the “new labor culture” of local workers that helped attract Daimler officials. Company officials said they were pleased by the educational levels and attitudes of their new workers; the company operates a training facility on the factory grounds.

Daimler officials said the government had provided no cash incentives for the factory but had paid the cost of running electric lines about 12 miles from the center of Saltillo. It also had paid for site preparation and for the roads that connect the plant to local roads.

Calderon was accompanied to Saltillo by a large army contingent, as well as by a hefty personal security force. He has been leading a newly aggressive battle against his country’s drug cartels, and a harsh war has broken out between the sides. Calderon has turned to the army because the drug cartels have outgunned many local police forces.

Movement around Saltillo was greatly restricted while Calderon was in town, and security at the plant during the dedication ceremony was intense.