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Mercedes chief's goal: Restore the star's shine
By Mark Landler The New York Times
When DaimlerChrysler asked Eckhard Cordes to take the helm of Mercedes-Benz last summer, he knew it was less a promotion than an anointment. Not only is Mercedes the flagship of this trans-Atlantic company, it has long been the crown jewel of German industry.
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Still, these days Mercedes stands for something else. Deteriorating profit and mounting quality problems have made Mercedes a metaphor for Germany's struggle to maintain its place in the global economy.
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"I was surprised that the outside world obviously sees this job to be in a different league," Cordes said in an interview at Mercedes' headquarters here. "I was totally astonished."
.
Once the reliable profit engine of DaimlerChrysler, Mercedes has become the company's problem child, standing in the corner normally occupied by the resurgent Chrysler.
.
The problems start with the weak dollar, which makes German luxury cars less competitive in the United States. But Mercedes is battling its own demons, chief among them a recognition that its once-matchless reputation for quality has slipped in recent years.
.
Now, as the world's gearheads gather for the annual Detroit auto show, Cordes has broken a self-imposed gag order to talk about what ails Mercedes, and how it can be cured.
.
Cordes, a brisk, blunt-speaking 54-year-old, has done turnarounds before. He took DaimlerChrysler's truck division from $360 million in operating losses in 2002 to a profit of more than $1 billion the next year. But his tool of choice - deep cost-cutting - may be less effective at Mercedes, where workers just signed a new contract.
.
Analysts say production costs at Mercedes are still too high, especially in this unforgiving economic climate. The company has too many white-collar employees. Its assembly lines are too complex, and it makes too many of its own components, like car seats.
.
Given the iconic status of Mercedes in Germany, Cordes must tread carefully. The man first chosen for his job, Wolfgang Bernhard, was abruptly discarded in April after his blustery statements about the need for a drastic overhaul provoked an outcry on the factory floor. Cordes, who is viewed as a prime candidate to replace DaimlerChrysler's chief executive, Jürgen Schrempp, cannot afford a misstep.
.
But as he prepared to present a redesigned sport utility vehicle, as well as other new models, in Detroit, Cordes insisted he would do whatever was necessary to restore Mercedes-Benz to its pole position among the world's luxury cars.
.
"Once you detect a problem, tackle it and get it out of the way," he said. "From time to time, if you need to be brutal, be brutal."
.
There is little Mercedes can do about exchange rates, of course. But unlike other German manufacturers like Porsche or Bayerische Motoren Werke, which have insulated themselves from exchange-rate swings through aggressive currency hedging, Mercedes is dangerously exposed, analysts say, because most of its hedges are expiring.
.
Cordes would not discuss DaimlerChrysler's exposure, but he acknowledged that the stronger euro was a burden in North America, where Mercedes generates a quarter of its sales.
.
The weak dollar has already taken a toll on profit margins at Mercedes, which have eroded from an average of 6.4 percent between 1999 and 2003, to 2.5 percent in the third quarter of 2004. Sales of Mercedes in the United States have fallen steadily in euro terms since 2002, when they peaked at €11.2 billion. This year, American sales may drop to €8.2 billion, according to a recent projection by Goldman Sachs.
.
[On Sunday, DaimlerChrysler said that its global car sales for 2004 rose 2.1 percent to 3.9 million vehicles, but sales at the Mercedes division fell 0.8 percent to 1.2 million units, Reuters reported from Detroit.]
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One thing Mercedes can do is expand production at its single American assembly plant, in Tuscaloosa, Alabama. Because the plant's costs are in dollars, it acts as a hedge against the effects of a rising euro and a falling dollar.
.
Mercedes has made its M-class sport utility vehicle in Tuscaloosa since 1997. It is adding a second model, the Grand Sports Tourer, which looks like a cross between a sport utility and a station wagon, and the G-class, a more rugged SUV. The M-class initially drew complaints about quality, but Cordes said the cars rolling out of Alabama today were every bit as good as those made in Germany.
.
Would that the German-built cars were as well-made as the Mercedes-Benzes of the past. It is not that the cars run badly when they are new. But things tend to go fluky as they age, particularly with electronic gadgets, which are more complex in a Mercedes than in almost any other car.
.
In a J.D. Power & Associates poll of vehicle reliability three years after purchase, Mercedes ranked below the industry average, behind even Chrysler. In a survey of customer satisfaction by the German automotive club, All- gemeiner Deutscher Automobil-Club, it finished 31 out of 33 cars, beating only Land Rover and Volkswagen.
.
Such numbers are galling to Mercedes executives, who view any result other than No. 1 as a cause for shame. But Cordes, who made his name at DaimlerChrysler as a deal-maker rather than an engineer, seems less defensive about the quality problems than some of his colleagues.
.
"There is what you call a quality issue out there. Everybody knows it," he said. "I would be lying if I say everything is wonderful." But he added, "What currently comes out of our factory is O.K."
By Mark Landler The New York Times
When DaimlerChrysler asked Eckhard Cordes to take the helm of Mercedes-Benz last summer, he knew it was less a promotion than an anointment. Not only is Mercedes the flagship of this trans-Atlantic company, it has long been the crown jewel of German industry.
.
Still, these days Mercedes stands for something else. Deteriorating profit and mounting quality problems have made Mercedes a metaphor for Germany's struggle to maintain its place in the global economy.
.
"I was surprised that the outside world obviously sees this job to be in a different league," Cordes said in an interview at Mercedes' headquarters here. "I was totally astonished."
.
Once the reliable profit engine of DaimlerChrysler, Mercedes has become the company's problem child, standing in the corner normally occupied by the resurgent Chrysler.
.
The problems start with the weak dollar, which makes German luxury cars less competitive in the United States. But Mercedes is battling its own demons, chief among them a recognition that its once-matchless reputation for quality has slipped in recent years.
.
Now, as the world's gearheads gather for the annual Detroit auto show, Cordes has broken a self-imposed gag order to talk about what ails Mercedes, and how it can be cured.
.
Cordes, a brisk, blunt-speaking 54-year-old, has done turnarounds before. He took DaimlerChrysler's truck division from $360 million in operating losses in 2002 to a profit of more than $1 billion the next year. But his tool of choice - deep cost-cutting - may be less effective at Mercedes, where workers just signed a new contract.
.
Analysts say production costs at Mercedes are still too high, especially in this unforgiving economic climate. The company has too many white-collar employees. Its assembly lines are too complex, and it makes too many of its own components, like car seats.
.
Given the iconic status of Mercedes in Germany, Cordes must tread carefully. The man first chosen for his job, Wolfgang Bernhard, was abruptly discarded in April after his blustery statements about the need for a drastic overhaul provoked an outcry on the factory floor. Cordes, who is viewed as a prime candidate to replace DaimlerChrysler's chief executive, Jürgen Schrempp, cannot afford a misstep.
.
But as he prepared to present a redesigned sport utility vehicle, as well as other new models, in Detroit, Cordes insisted he would do whatever was necessary to restore Mercedes-Benz to its pole position among the world's luxury cars.
.
"Once you detect a problem, tackle it and get it out of the way," he said. "From time to time, if you need to be brutal, be brutal."
.
There is little Mercedes can do about exchange rates, of course. But unlike other German manufacturers like Porsche or Bayerische Motoren Werke, which have insulated themselves from exchange-rate swings through aggressive currency hedging, Mercedes is dangerously exposed, analysts say, because most of its hedges are expiring.
.
Cordes would not discuss DaimlerChrysler's exposure, but he acknowledged that the stronger euro was a burden in North America, where Mercedes generates a quarter of its sales.
.
The weak dollar has already taken a toll on profit margins at Mercedes, which have eroded from an average of 6.4 percent between 1999 and 2003, to 2.5 percent in the third quarter of 2004. Sales of Mercedes in the United States have fallen steadily in euro terms since 2002, when they peaked at €11.2 billion. This year, American sales may drop to €8.2 billion, according to a recent projection by Goldman Sachs.
.
[On Sunday, DaimlerChrysler said that its global car sales for 2004 rose 2.1 percent to 3.9 million vehicles, but sales at the Mercedes division fell 0.8 percent to 1.2 million units, Reuters reported from Detroit.]
.
One thing Mercedes can do is expand production at its single American assembly plant, in Tuscaloosa, Alabama. Because the plant's costs are in dollars, it acts as a hedge against the effects of a rising euro and a falling dollar.
.
Mercedes has made its M-class sport utility vehicle in Tuscaloosa since 1997. It is adding a second model, the Grand Sports Tourer, which looks like a cross between a sport utility and a station wagon, and the G-class, a more rugged SUV. The M-class initially drew complaints about quality, but Cordes said the cars rolling out of Alabama today were every bit as good as those made in Germany.
.
Would that the German-built cars were as well-made as the Mercedes-Benzes of the past. It is not that the cars run badly when they are new. But things tend to go fluky as they age, particularly with electronic gadgets, which are more complex in a Mercedes than in almost any other car.
.
In a J.D. Power & Associates poll of vehicle reliability three years after purchase, Mercedes ranked below the industry average, behind even Chrysler. In a survey of customer satisfaction by the German automotive club, All- gemeiner Deutscher Automobil-Club, it finished 31 out of 33 cars, beating only Land Rover and Volkswagen.
.
Such numbers are galling to Mercedes executives, who view any result other than No. 1 as a cause for shame. But Cordes, who made his name at DaimlerChrysler as a deal-maker rather than an engineer, seems less defensive about the quality problems than some of his colleagues.
.
"There is what you call a quality issue out there. Everybody knows it," he said. "I would be lying if I say everything is wonderful." But he added, "What currently comes out of our factory is O.K."
it's funny they say the cars powertrains are fine but if all the electronics control them then thats a problem.
and the freakin doors all have stickers on them that say do not break, it's not a bottle a water, what do they do if a MB arrives at the dealer and a door seal sticker has been broken.
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