this was in todays NY times...i though you all would enjoy it ..>Looks like they finally aknowledge the poor quality.


FRANKFURT, Oct. 5 - Eckhard Cordes, the man DaimlerChrysler picked to put the luster back into Mercedes-Benz, has slipped out of the office during his first week on the job, joining colleagues in the Alps along the Swiss-Austrian border to test-drive cars made by the competition.

It is a handy way for Mr. Cordes to escape, at least briefly, the scrutiny that comes with running Germany's most famous carmaker. Few jobs in German industry carry more cachet - or loftier expectations.

For Mr. Cordes, a disciplined executive who has vowed not to give any interviews until January, the pressure is all the more intense because his performance at Mercedes could position him to succeed Jürgen E. Schrempp as chief executive of DaimlerChrysler, the trans-Atlantic automotive empire that has traveled a rocky road since it was formed in 1998.

By taking over the empire's crown jewel, Mr. Cordes, 53, has instantly become a front-runner to replace Mr. Schrempp, executives at the company said. The succession battle, they said, was shaping up as a two-horse race between Mr. Cordes and the head of Chrysler, Dieter Zetsche.

Surprisingly, given Chrysler's checkered history, Mr. Cordes may be under more pressure than Mr. Zetsche. Chrysler, propelled by an array of new models, has begun to show profits after suffering heavy losses last year - Mr. Zetsche's fortunes are likely to rise along with it.

Mercedes-Benz, by contrast, has slipped in profitability, as it battles high costs, an unfavorable euro-dollar exchange rate and persistent doubts about its quality. Long the profit engine of DaimlerChrysler, Mercedes warned last summer that it would fall short of its 2003 earnings this year.

"This is not a typical turnaround situation," said Graeme Maxton, an analyst at Autopolis, a consulting firm in London. "This is a situation where the reputation of the brand is at stake."

Adam Jonas, an analyst at Morgan Stanley in London, said Mr. Cordes had the toughest job at DaimlerChrysler. "Three of their four big businesses are doing rather well," he said, referring to Chrysler, the truck division and financial services. "It's really Mercedes that has been disappointing."

Restoring the brand's gilded reputation will be a complex, potentially costly task for Mr. Cordes, a deal maker who helped broker the merger of Daimler-Benz and Chrysler and made his name in operations by turning around the company's money-losing commercial vehicle unit.

At that division, which makes Freightliner trucks as well as Mercedes buses and vans, Mr. Cordes used a straightforward, if painful, strategy of layoffs and plant closings to take a business with an operating loss of $360 million in 2002 to an operating profit of more than $1 billion last year.

"He didn't enjoy doing it, but there was no other choice," said a spokesman for the division, Othmar M. Stein.

Fixing Mercedes will demand more than a scalpel, however. Mr. Jonas estimates that the company's efforts to improve quality - which can require slowing the production line, among other steps - may actually add $488 to $610 to the cost of each vehicle. This comes at a time when Mercedes's cost per car is already higher than those of rivals like BMW.

Mercedes has little choice but to spend the money. In a recent J. D. Power & Associates survey of vehicle reliability after three years, it ranked below the industry average and behind its sister brands, Chrysler, Dodge and Jeep. In a survey of customer satisfaction by the German automotive club, ADAC, it finished 33 out of 34 cars, beating only Land Rover.

Defenders of Mercedes say its woes stem from the car's sophisticated electronic system and its demanding owners. But the luxury brand of Toyota, Lexus, also has a lot of gadgetry - not to mention hard-to-please owners - and it still finishes at, or near, the top of reliability surveys.

"Once people wake up to the idea that Mercedes is not that reliable, two things will happen," Mr. Maxton said. "People will switch to other brands, and the residual value of the cars will go down."

Mercedes insists its quality campaign is starting to bear fruit. But a spokesman, Johannes Reifenrath, acknowledged that there would be a lag before the results turned up in reliability surveys.

In addition to better cars, Mr. Reifenrath said Mercedes would roll out several new models over the next year. Among those are a redesigned version of its top-of-the-line S-class sedan and a new R-class, a low-slung vehicle that looks like a cross between a sport utility vehicle and a station wagon.

"Dr. Cordes finds an extremely full portfolio that will come through for him in 2005," Mr. Reifenrath said.

Advertisement


The flashy new cars are a legacy of Mr. Cordes's predecessor, Jürgen Hubbert, a silver-haired engineer who ran Mercedes for nearly 15 years. Mr. Hubbert did his successor another favor by negotiating a hard-fought wage agreement with the company's German workers that will reduce its labor costs by 500 million euros ($616 million) a year by 2006.

Still, no amount of cost-cutting or new cars can solve problems like the strong euro, which has badly dented sales in the United States. Mercedes is ramping up production at its plant in Tuscaloosa, Ala., which will give it a natural hedge against the effects of the exchange rate.

But DaimlerChrysler is handicapped versus its rivals, analysts say, because its financial hedges are expiring sooner than those at BMW or Porsche. These hedges, basically currency contracts, are designed to cushion auto exporters against the negative impact of a weaker dollar.

At the truck unit, Mr. Cordes drove down costs by sharing components between models. His most ambitious project was a new family of engines that could be used in Daimler trucks from the United States to China. At Mercedes, such opportunities are more limited; the brand's reputation would be further dented if it became known that a Mercedes was a glorified Chrysler.

For Mr. Cordes, the biggest challenge may be personal. As a deal maker rather than an engineer, he must win the trust of one of Germany's proudest, most engineering-driven companies.

Outsiders note that he got the job only after Wolfgang Bernhard, the former No. 2 executive at Chrysler and Mr. Hubbert's first designated successor, antagonized the workers with talk of radical changes. He was abruptly sidelined by Mr. Schrempp and has since left the company.

"Bernhard's approach was too strong," said Ferdinand Dudenhöffer, director of the Center for Automotive Research in Gelsenkirchen. "Cordes is a very quiet guy, but one who will address the issues. It's better for them right now to have a guy like him than an engineer."

 

Will his second official act as CEO be to spend a week at the ML-class factory in Alabama as QC inspector? That would be more useful, although less fun, than driving Audis and BMWs through the Alps. The ML-class alone is probably responsible for half of M-B's perceived slippage in quality.

 

Great article thanks for posting it. Schrempp emphatically insisted on cheaper parts from all his suppliers...he got what he paid for.

 

From reading that, it appears that he wasn't quoted as saying they will improve quality (you could infer that) although as another poster noted, this stems from the American version of the car and probably the electrical / computer problems of the first year E class.

 

Very interesting. I typically read the Times but missed this. Thanks for pointing it out.

 

Too bad it probably won't help the brand much right now. My boss is driving an 18-year old Benz that he is getting ready to retire. He has decided not to buy a new Benz because of this exact reason, reliability. I wonder how many other loyal MB owners are going to be switching brands.

 

Samoan Ridah wrote:
"Too bad it probably won't help the brand much right now. My boss is driving an 18-year old Benz that he is getting ready to retire. He has decided not to buy a new Benz because of this exact reason, reliability. I wonder how many other loyal MB owners are going to be switching brands."

I am still driving my 2001 E-430 for the same reason. It has been an exceptional car with a few minor problems. I look at the new ones each year and look at owner's comments on all the newsgroups, check the quality ratings on Edmunds and J.D. Powers, and even Consumer Reports, hoping to find some reason to buy new E-500. So far, I am persuaded to keep the one I own. I also have a 2003 BMW 530i that has been trouble free. If Mercedes quality is not improved, my next car will be another BMW. In my opinion, quality, ride, and drivability are better in the BMW but I still enjoy seeing that 3-star emblem on my hood when I'm driving. Hopefully the new president of Mercedes will improve things.

 

I am newly registered but have been reading posts on this forum for a very very long time, Thanks to everybody for your contributions, it helps a great deal.
I think the problem people have with mercedes is the price they paid for the car compaired with other cars, we all expect top quality product for the price we paid for our cars, we become very angry when we dont have trouble free motoring for our money, that is why merc owners complains far more about quality than others,
I have been driving mercedes since I started driving, my father drives '76 E230, he also own S600, I have personally own more than 12 different classes of mercedes and will never buy any other brand for a simple reason that I found them reliable than other cars, I started my wife on Honda Accord, she used 4 different types they were all breaking down most of the time, one thing I found useful is that merc will take you home even when they have fault, I then decided to change her to merc, I bought her C200 for a start in yr 2000, well guess what, she is now on her 6th one bought in march this year, I drive have E240 avantgarde and wife drives c200 elegance (I am sure you guys dont have this little engines in the US) both cars bought this year, we have not had any major issues with the cars apart from one break recall on mine and , the only complain I have is that I believe I should have more toys in the car for the price I paid. I read surveys and see people complain about things that are so minor, it not worth talking about.
May I also agree that ML should have never left the design paper, it was terrible, I own one for two years, I never had any mechanical or electric problem, it was the plastics, immitation wood looking plastics, dashbord was poor quality plastic and leather quality and rattles, poor driving experience and the sitting position was bad.