Recalls - WSJ Article
04-01-2005, 03:56 PM
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Recalls - WSJ Article
Huge Mercedes Recall Dents Daimler
By STEPHEN POWER
Staff Reporter of THE WALL STREET JOURNAL
April 1, 2005; Page A3
FRANKFURT -- DaimlerChrysler AG said it is recalling 1.3 million Mercedes-Benz cars world-wide, in a move that likely will put a further dent in its luxury-car division's profit in the first quarter.
The recall , which includes cars made as recently as last month, is the largest ever by Mercedes in a single step and covers several hundred thousand cars in the U.S. It is also the latest sign of quality problems that have weighed on the auto maker, undercutting recent assurances by DaimlerChrysler executives that the luxury division's quality problems are largely under control.
DaimlerChrysler's latest problem with the quality of its high-end vehicles throws into question the company's timetable for restoring Mercedes's profit, which normally accounts for as much as half of DaimlerChrysler's operating profit. In the fourth quarter, Mercedes's operating profit fell 97% as a result of quality problems at the unit, a weak dollar and losses at the Mercedes division's small-car unit, called Smart.
As a result of the latest recall , Mercedes "will also make further provisions for product guarantees by the end of the first quarter," a spokesman said. Provisions for addressing quality problems with delivered cars already had been increased last year to €1.2 billion ($1.55 billion), the spokesman said, though a considerable amount was used to pay the costs of years of recall coverups at its Japanese commercial-vehicle subsidiary, Mitsubishi Fuso Truck & Bus Corp.
The recall is a fresh headache for Robert Bosch GmbH, one of Mercedes's oldest and most important suppliers. The Stuttgart-based company, which also supplied a faulty diesel pump that briefly led Mercedes to suspend production at some of its factories earlier this year, provided many of the components that were cited in yesterday's announcement, such as battery-control units and voltage regulators. Robert Bosch said in a statement yesterday that it was cooperating with DaimlerChrysler on supplying new parts. A Robert Bosch spokesman also said it was premature to say that the company would share the cost of the recall .
The affected cars include certain Mercedes models with six- and eight-cylinder gasoline engines built between June 2001 and November 2004 that will need to have their voltage regulators checked and in some cases replaced, the company said. The recall also covers certain E-class and CLS-class models built from January 2002 until January 2005, that need new battery-control software. Finally, the company said the braking systems on some E, SL and CLS-class made between June 2001 and March 2005 will need to be updated.
In announcing the recall , DaimlerChrysler, also based in Stuttgart, didn't provide many details about the kinds of problems that have emerged in the affected cars, though one company spokesman in the U.S. said the car maker had no evidence that any of the glitches had led to accidents or injuries in the U.S. market.
"These are not safety issues, but they are very aggravating for customers," said Geoff Day, a spokesman for Mercedes's U.S. office. As examples of the problems, Mr. Day cited power surges and power failures "which lead to flat batteries" or can cause the cars' electronic navigation system to malfunction.
In the case of the brake systems, a spokesman for DaimlerChrysler in Stuttgart said that the company has received reports of "a few cases in which customers claimed that damage to property occurred" after the systems failed to work as expected.
The size of the recall caught many longtime Mercedes watchers by surprise.
As recently as four weeks ago, senior executives were extolling recent improvements in Mercedes quality. "The situation" regarding Mercedes quality "is not as dramatic as has been reported," DaimlerChrysler CEO Jürgen Schrempp said in a March 1 interview with The Wall Street Journal. "What's coming out of the [company's] plants is the highest Mercedes quality ever," he added, repeating a comment Mercedes chief Eckhard Cordes made before financial analysts in February. "Within the next 12 months we should see quite an improvement."
Despite an expected rise in unit sales, DaimlerChrysler has said it expects only "slightly higher" operating profit this year, in part because of Mercedes's financial weakness. Mr. Cordes, who took the helm at Mercedes last year, is trying to raise Mercedes's return on sales to 7% by 2007 from its present annual level of 3.4%. His boss, Mr. Schrempp, has called the division's recent performance "unacceptable" and vowed in February that "we will be in control of the challenging situation" at Mercedes "within 12 months."
By STEPHEN POWER
Staff Reporter of THE WALL STREET JOURNAL
April 1, 2005; Page A3
FRANKFURT -- DaimlerChrysler AG said it is recalling 1.3 million Mercedes-Benz cars world-wide, in a move that likely will put a further dent in its luxury-car division's profit in the first quarter.
The recall , which includes cars made as recently as last month, is the largest ever by Mercedes in a single step and covers several hundred thousand cars in the U.S. It is also the latest sign of quality problems that have weighed on the auto maker, undercutting recent assurances by DaimlerChrysler executives that the luxury division's quality problems are largely under control.
DaimlerChrysler's latest problem with the quality of its high-end vehicles throws into question the company's timetable for restoring Mercedes's profit, which normally accounts for as much as half of DaimlerChrysler's operating profit. In the fourth quarter, Mercedes's operating profit fell 97% as a result of quality problems at the unit, a weak dollar and losses at the Mercedes division's small-car unit, called Smart.
As a result of the latest recall , Mercedes "will also make further provisions for product guarantees by the end of the first quarter," a spokesman said. Provisions for addressing quality problems with delivered cars already had been increased last year to €1.2 billion ($1.55 billion), the spokesman said, though a considerable amount was used to pay the costs of years of recall coverups at its Japanese commercial-vehicle subsidiary, Mitsubishi Fuso Truck & Bus Corp.
The recall is a fresh headache for Robert Bosch GmbH, one of Mercedes's oldest and most important suppliers. The Stuttgart-based company, which also supplied a faulty diesel pump that briefly led Mercedes to suspend production at some of its factories earlier this year, provided many of the components that were cited in yesterday's announcement, such as battery-control units and voltage regulators. Robert Bosch said in a statement yesterday that it was cooperating with DaimlerChrysler on supplying new parts. A Robert Bosch spokesman also said it was premature to say that the company would share the cost of the recall .
The affected cars include certain Mercedes models with six- and eight-cylinder gasoline engines built between June 2001 and November 2004 that will need to have their voltage regulators checked and in some cases replaced, the company said. The recall also covers certain E-class and CLS-class models built from January 2002 until January 2005, that need new battery-control software. Finally, the company said the braking systems on some E, SL and CLS-class made between June 2001 and March 2005 will need to be updated.
In announcing the recall , DaimlerChrysler, also based in Stuttgart, didn't provide many details about the kinds of problems that have emerged in the affected cars, though one company spokesman in the U.S. said the car maker had no evidence that any of the glitches had led to accidents or injuries in the U.S. market.
"These are not safety issues, but they are very aggravating for customers," said Geoff Day, a spokesman for Mercedes's U.S. office. As examples of the problems, Mr. Day cited power surges and power failures "which lead to flat batteries" or can cause the cars' electronic navigation system to malfunction.
In the case of the brake systems, a spokesman for DaimlerChrysler in Stuttgart said that the company has received reports of "a few cases in which customers claimed that damage to property occurred" after the systems failed to work as expected.
The size of the recall caught many longtime Mercedes watchers by surprise.
As recently as four weeks ago, senior executives were extolling recent improvements in Mercedes quality. "The situation" regarding Mercedes quality "is not as dramatic as has been reported," DaimlerChrysler CEO Jürgen Schrempp said in a March 1 interview with The Wall Street Journal. "What's coming out of the [company's] plants is the highest Mercedes quality ever," he added, repeating a comment Mercedes chief Eckhard Cordes made before financial analysts in February. "Within the next 12 months we should see quite an improvement."
Despite an expected rise in unit sales, DaimlerChrysler has said it expects only "slightly higher" operating profit this year, in part because of Mercedes's financial weakness. Mr. Cordes, who took the helm at Mercedes last year, is trying to raise Mercedes's return on sales to 7% by 2007 from its present annual level of 3.4%. His boss, Mr. Schrempp, has called the division's recent performance "unacceptable" and vowed in February that "we will be in control of the challenging situation" at Mercedes "within 12 months."
