UPDATE 2-BMW to announce decision on Mexico this week – Reuters

Posted: Monday, June 30, 2014

* BMW to make announcement in Mexico on July 3

* BMW declines to comment on nature of announcement

* BMW looking for locations for new factory

(Adds detail on factory plans from sources, background)

MEXICO CITY/MUNICH, June 30 (Reuters) – Germany’s BMW
said it would make an announcement in Mexico on July
3, all but confirming a widely expected decision to build a new
factory to meet growing demand for premium cars, shortly after
its rival Daimler announced similar plans.

“A decision will be made public,” a spokesman for the
Munich-based auto maker said on Monday when asked if it would
make an announcement about a factory in Mexico.

BMW declined to comment further beyond saying the
announcement would be made in Mexico on July 3.

A decision to build a factory in Mexico would come on top of
BMW’s plans to invest $1 billion to expand production capacity
at its factory in Spartanburg, South Carolina, by 50 percent.

BMW Chief Executive Norbert Reithofer said last week that
the Bavarian carmaker was still deliberating about where to
locate a new factory and would reach a decision before the
summer break.

Premium auto makers BMW, Audi and Mercedes-Benz are
expanding their global production footprint as their German
factories struggle to meet strong demand for offroaders and
limousines in the United States and Asia.

In October, Reuters reported that BMW was looking at plant
sites in Mexico, according to Mexican government officials.

Supplier sources said BMW had already mapped out a
production timetable for Mexico, with a tentative plan to begin
assembly operations in late 2017, ramping up annual capacity to
200,000 by 2020.

On Friday, Daimler and Renault Nissan
said they would invest 1 billion euros ($1.36 billion)
to develop small cars and build a factory in Aguascalientes,
Mexico.

Building cars in Mexico allows European car makers to sell
cars in the United States while avoiding some of the currency
and tariff costs that crimp profits on imported vehicles. Mexico
also offers lower labour rates than Germany and the United
States.

Daimler AG’s Mercedes-Benz, Nissan Motor Co
, Honda Motor Co, Mazda Motor Corp and
Volkswagen AG already have large auto factories in
Mexico.

At around $2.50 an hour, manufacturing wages in the country
are nearly 20 percent cheaper than in China, according to a Bank
of America study. That study put U.S. manufacturing wages at
just under $20 an hour, on average.

German carmakers’ overall output is set to rise for the
fifth year in 2014, driven by overseas production, German auto
industry association VDA has said.

(Reporting by Luis Rojas in Mexico City and Irene Preisinger in
Munich; additional reporting by Edward Taylor; and David Graham;
editing by Tom Pfeiffer)

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