Mercedes-Benz to reduce S-Class production because of lower demand image

Daimler AG will build less Mercedes S-Class sedans until the next generation model will debut in 2013.

The luxury automaker will move to a one shift operation at the Sindelfingen plant in order to bring production in line with lower demand.

“Workers manufacturing the S class will be reassigned to the C-class assembly line during this period,” the company announced on Wednesday. Daimler’s decision is a new sign that the problems in Europe’s car market are starting to spread to premium brands.

The S-Class is Mercedes’ most expensive car and the model that generates the highest earnings contribution for Mercedes per car sold. In the first eight months of the year, S-Class sales in Europe dropped 27 percent to 5,227, according to market research firm JATO Dynamics.

Last month, Daimler warned about meeting profit targets at Mercedes, with CEO Dieter Zetsche saying at the time that the group was preparing for a challenging environment in Europe and China. So far, China has been a major source of profits for Mercedes-Benz and has acted as a shield from the problems in Europe. However, Mercedes has been suffering more in China than its competitors, as sales rose 7 percent in September, compared with 59 percent for BMW and 21 percent for Audi.