Mercedes Chief Expects
Market to Worsen

By MATTHIAS KRUST and CHRIS REITER
DOW JONES NEWSWIRES
February 11, 2005 11:25 a.m.

STUTTGART – The head of DaimlerChrysler AG's Mercedes division said he expects market conditions to worsen and burden operations this year.

In a note to employees seen by Dow Jones Newswires, Eckhard Cordes said increased competition in the premium segment has resulted in "enormous price pressure."

"Because of higher raw-material prices and worse foreign-exchange assumptions, these difficult market conditions will further intensify and burden our business in the current year much more severely than previously," said Mr. Cordes, who took over the top job at Mercedes Car Group in October.

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Mercedes Car Group, which manages the Mercedes-Benz and Smart brands, is traditionally DaimlerChrysler's cash cow. But quality problems, aging Mercedes-Benz models, and losses at the small-car Smart brand have led to a sharp decline in the unit's profits.

In the fourth quarter, Mercedes's operating profit fell to €20 million ($25.74 million) from €784 million. That follows a 62% fall in the third quarter. (See related article.)

The divergence from Mercedes's 2004 sales and profit margin targets was "very big" and "not acceptable," said Mr. Cordes.


The Mercedes boss was seeking support from employees for the newly launched CORE program, which seeks to improve Mercedes's earnings by €3 billion and enable the division to generate a 7% operating profit margin in 2007.

He called this program "the most important and most extensive ... transformation program" in recent decades. "We have to do everything to achieve a competitive cost position as soon as possible," he said. Mr. Cordes repeated that the program would focus on costs and increasing revenue, but didn't provide further insight into the planned measures.

Thursday, Mr. Cordes didn't rule out job cuts and other personnel measures as part of the program. Still, job cuts in Germany would be complicated by a labor agreement from last summer that includes job guarantees through 2011.

Mr. Cordes also reiterated his commitment to improving Mercedes's quality, which has slipped in recent years. "I assume personal responsibility for bringing Mercedes's quality again to the highest level," he said.

A company spokesman confirmed a letter was sent to about 100,000 employees world-wide, but declined to comment on the contents.

Write to Matthias Krust at matthias.krust@dowjones.com and Chris Reiter at chris.reiter@dowjones.com

 

dealer attitude service must also be addressed in order to bring the customers back....quality of service and relationship is horrible compared to Lexus. I dont admire much of what lexus does or the cars they produce, but i must admit the several dealers and service departments i have been to have been far more receptive and responsive than those at MB....just my 2 cents

 

dealer attitude service must also be addressed in order to bring the customers back


.............you are absolutely right. Overall, MB deales in North America act like they doing you a big favor, for which you must be grateful and thank them endlessly. Another issue issue is that MB dealers seem not to realize that the world is changing. Potential Mb buyers today are not just older white men. Potential buyers include women, minorities and yes the guy that walks into the show room with his pants almost falling off. Acura dealers will court him, and MB dealers will look at him in disdain. The world is changing.

Ted

Ted

 

I couldn't agree more - had a Lexus before - Mercedes service is absolutely horrible compared to them. They will try to find any way possible to charge you for something, I'm left on hold for so long at times it bounces back to the geenral answering system, half the time the service rep doesn't call me back and the quality of any repairs is questionable to say the least. If I catually get a loaner, they try to pawn off a rental ford or Saab if I'm lucky. They seem to have more employees than they even need yet they are completely innefficient and like it was mentioned in the last post - act like they are doing you this huge favor.

BTW - This is Santa Monica W.I. Simonson I'm talking about - not sure how others experiences have been at different dealers. Lexus was amazing - hands down my best experiences in service were with them - no matter which dealership I would take my Lexus too, they treated me great. Since I didn't buy my Mercedes from WI Simonson accoring ot the service reps there, I don't get that great service - not in those xact words, but almost those exact words - man, cmon'. LOL.

 

Same here, in Chicago, although no where near as bad as BMW. Lexus has them beat hands down, its not even funny. If i have the same experience with the CLS as my last Benz, ill be back with Lexus for sure, if they could just start making some nicer looking cars...

i cant stand the MB loaner program, in fact our Benz outsourced it to Enterprise, at least they give u a C, but u have to sit with a second person, so thats 2 service advisros u have to wait for. Lexus gives u nice cars. I complained to the GM, and got some sob story how Lexus is mass prodcued, i think MB should supply their dealers with loaners based on dealer volume, and not make the dealer eat the loaners, but of coruse that may hurt their pockets too much...

 

My extended family in Vegas has had good luck with service here with their Mercedes cars over the last dozen years. Will be a first time Merc buyer here so no comment yet. Have noticed a change here with BMW service after some major problems and battles in the past. A bit of arrogance is imho gone in SOME areas.
Today is the 1st time I have ever heard advertisements from the local Merc dealer offering incentives on leases. They put a big emphasis on urging no credit/ low credit/1st time buyers to " come on in. You won't be turned down" ala GM and other brands.

 

Fletcher Jones since moving to that "palace" on Sahara is top notch. They are organized and the service rep I have could not do the job better. I am very pleased with their Service Department.

I have not purchased a car there yet in 10 years due to the "no good deal" approach but just recently they matched a low price on a new E350 wagon. Although I changed my mind on the wagon they are now competitive!

I wonder if the excellent service setup has anything to do with Fletcher Jones having a Lexus dealership about a mile or less away...:-)

 

Hello neighbor. It could be. It is amazing over the last few years how Sahara has turned into dealership row. Tear down and build. Tear down and build. Never knew that "basement" showroom in the palace existed until my 5th visit.
I would like to see how they operate and move cars when a customer wants one of the cars in the middle. A lot of metal and $$$$ packed in there. LOL

 

Anything's better than that Desert BMW on Sahara! Fletcher Jones in Newport Beach left the oil cap off after an oil service on my old 400E several years ago, which I wasn't happy about, but the follow-up from the customer service department was top-notch. It's all about the recovery. Sounds like the new LV facility is fantastic.

Regarding service loaners, manufacturers and dealers need to get a clue about the power of product marketing in the form of "samples" and product testing by the consumer. Most of us have sampled something at Costco or the supermarket that we never would've purchased on our own, yet did because we tried it and liked it. Same with loaner cars --- I know two people who had Lexus RX300s, took them in for service and got brand-new RX330s as loaners (rather than an Enterprise Corolla), and were so impressed with the improvements that they decided to buy RX330s. One of them just talked a co-worker into buying an RX330 as well, so there's a ripple effect that is far greater than the dealers' mostly greedy minds can understand.

 

I was just in that underground showroom last week and funny, the same thought ran through my mind. They must use a lot of touch-up paint...:-)

I live in Summerlin and it sure makes getting there easier than that old place down on Rancho.

 

Desert BMW is moving into the old Pontiac showroom at the corner of Sahara and Rainbow (I think that's the intersection.) Hugh lot and showroom. They also have a place out in Henderson at that huge 10-12 dealer Auto Center.

Had the 2003 first service in early November and service advisor got me a MB loaner rather than the Rent a Wreck Enterprise. He called me and said there was some overspray on the rear fender well and that they were going to have it refinished for me! I didn't even know about the spot. And I did not buy the car there....

This town is unbelievable in the building and growing that is going on. Bring your money and help the local economy survive..:-)

 

I made a huge mistake and sold my place in Summerlin a couple of years ago just months before things started going crazy. HUGE mistake. We won't even discuss it. Hindsight is 20/15 here. I visit a couple of times a year and spend most of the time off the Strip with friends, and the building really is incredible!

 

Love that vehicle you have on order!

Crazy is right...property values here have increased by 50-75% in the past 6-12 months! 20/15 hindsight is alive and well everywhere when it comes to real estate:-)

Visitors to LV should rent a car for a day, get off the strip and take a look at the Summerlin area and what this town has besides Casinos and Hotels. I cannot believe what this place looked like 10 years ago when we arrived...barren desert. Now there are tree lines streets, beautiful parks and trails and every description of homes you could want.

 

Don't know anything about Summerlin, but had a deposit down on a lot in a subdivision up on the hillside that had a spectacular view of the city below. Did not go through with the purchase though. That was 30 some years ago and I'm curious if what I have saved on property taxes over the years (I assume Nevada at least has property taxes?) makes up for what the lot would now be valued at today - assuming I had just held onto it and not built. (I think it was a few blocks from where there was eventually built a Mormon Temple.)

 

The Mormon Temple is on the East side of Las Vegas near Sunrise Mountain I believe. I don't know what you paid for the lot 30 years ago but now land is the most desired commodity. That land was probably built on during the past 10-20 years and has most likely appreciated beyond belief. There was an item in the paper just yesterday about the 25-75% increase in just the past year in real estate values. And yes, the homeowners are up in arms with the property taxes based on the new values. The legislature is iooking at relief for them and there will be a California revolt unless they do something this session. Needless to say your old piece of land would be well worth the property taxes through the years.

 

it amazes me that MB and DC execs don't realize the source of the their problems at the beginning of each day, as they stand before their looking glasses, repeating out loud, "mirror, mirror on the wall, who is the fairest of them all."

arrogance is a costly endeavour indeed.

someone has to finance it for them.

guess who...

yup, you and me.

 

Without tax relief, everyone you know considering a career change should join a mortgage company and be standing by ready to set up home equity lines of credit. I was talking about that exact subject last night to a friend of mine who I convinced to stop renting and buy a condo off Summerlin Parkway & Canyon Run on the golf course for $125K about 4 years ago. What a nice friend, eh?

 

It seems that quality problems have dealt the heaviest blow to the MB unit. While the division continues to churn out new models (SLK, CLS, ML (very soon)), quality problems have driven potential and past customers away.

In general, Lexus dealers are more courteous and customer satisfaction driven. MB service has always been more aloof, but good thing my service department doesn't shed any light of arrogance. They don't kiss my a__ either, and I will rather not have them do that. Just be straight up and tell the problem, that you will fix it, and I will be happy. They have done all three so far.

But BMW dealers? I've been to several and most of them seem to be a tad arrogant. Porsche dealers tend to be stoic but they are perhaps the least pushy of the bunch.