Efforts to share development costs between the Chinese and the German groups come as the growth potential for combustion engines faces the twin threat of the COVID-19 crisis and a regulatory clampdown on vehicle emissions.
German factories will be retooled gradually to build electric drivetrains while the manufacture of combustion engines will continue in Germany, Daimler said.
“We are speechless. There was not even a discussion about potential alternative manufacturing locations,” said Michael Haeberle, the works council chief for Untertuerkheim.
“We have the ability to build four cylinder engines in Untertuerkheim but there were not talks about it.”
The alliance was first reported by German business daily Handelsblatt on Tuesday, citing company and industry sources.
Most of the engines will be made in China, Handelsblatt said. The alliance with Geely, which owns a 9.69% stake in Stuttgart-based Daimler, means that parts of an existing partnership with Renault <RENA.PA> will be pared back.
A Renault source told Reuters that the Daimler-Geely project does not mean an end of cooperation between Daimler and Renault <RENA.PA>.
Citing Daimler sources, Handelsblatt said the Daimler-Geely pact would save the German carmaker a “triple-digit million sum” – implying an amount above 100 million euros ($119 million) and less than 1 billion euros.
(Reporting by Jan Schwartz, Douglas Busvine, Gilles Guillaume and Ilona Wissenbach; Editing by Maria Sheahan and David Goodman)