With new US factory, Daimler skirts tariffs and unions

DETROIT: German automaker Daimler AG broke ground this week on a $500 million plant in Charleston, South Carolina to build vans, with the company hoping at last to avoid steep US import tariffs.

When the factory comes online by the end of the decade, it may also help the company pay lower wages and circumvent labor unions.

Volker Mornhinweg, head of Mercedes-Benz Vans at Daimler, said the key reasons for putting the plant in Charleston were the city´s excellent port operations and logistics and because Daimler already operates a factory next door.

Avoiding the 25 percent tariff that the United States puts on imports of commercial vehicles was also crucial.

"We won´t have to pay the tariff," he said, adding that the Mercedes-brand Sprinter vans were currently built in Dusseldorf, Germany and then shipped to the United States where they are re-assembled.

"It´s a logistical nightmare," Mornhinweg said.

South Carolina wages are markedly lower than those in Germany and the governor, Republican Nikki Haley, opposes organized labor.

"We discourage any companies that have unions from wanting to come to South Carolina because we don´t want to taint the water," she told The Greenville News, a local newspaper.

Assembly line workers get $18 an hour in South Carolina, according to Labor Department figures. Hourly wages for German autoworkers are closer to $37 an hour.

Frank Klein, director of operations at Mercedes-Benz Vans, said the company´s practice was to pay a "competitive" wage wherever it builds a plant.

According to Mornhinweg, the new Charleston plant should be operational around 2020, following the introduction of the next Sprinter model, with some versions capable of running on electricity or featuring driverless navigation.

The new Sprinter will also fall under Daimler´s Freightliner brand, part of its truck operations.

Daimler representatives touted their success in the US commercial van market, which represents nearly a half-million newly registered units per year and had traditionally been dominated by General Motors, Ford Motor Company and what is now known as Fiat Chrysler Automobiles.