Commercial Vehicle Group, Inc. (Nasdaq: CVGI) has entered into an agreement with Daimler Trucks North America LLC, a Daimler company (DTNA), through 2014 to provide products for DTNA's manufacturing facilities in Saltillo and Santiago, Mexico and three facilities in the United States. In accordance with the agreement, CVG will open a new facility near Saltillo, Mexico.
As part of the agreement, CVG will provide products to DTNA which include air-suspension and static seats, flooring systems, thermoformed plastic, injection-molded and soft trim interior components. The CVG products will be used on several DTNA models including the Cascadia, Columbia, Western Star and M2 platform-based vehicles.
Mervin Dunn, President and Chief Executive Officer of CVG, stated, "Daimler has been a valued, long-standing CVG customer and partner and we are very pleased to announce this agreement with Daimler Trucks North America. The fact that DTNA has chosen CVG to continue to work with them on the production of these platforms is a testament to CVG's capabilities and financial strength."
The company expects the Mexico facility to be in operation in mid 2011 and estimates the initial capital investment requirements to be in the range of $4 to $5 million with startup expenses (net of estimated savings and incentives) of approximately $1 to $2 million. CVG anticipates utilizing the facility to supply Daimler products along with other customers in the Mexico region as well as utilizing capacity for new business initiatives. Upon completion of the facility, the company estimates that incremental new business wins and the reduced cost basis of the Mexican operation will result in positive operating income results on an annual basis.
"This agreement also represents an opportunity for us to work with existing and new customers on new business opportunities in a low-cost production region and supports our strategy to diversify our geographic footprint. We remain focused on our existing manufacturing footprint and overall cost structure as we continue to align our operations with the needs of our customers," added Mr. Dunn.