Andaluz

Daimler's Pedal-to-the-Metal Plan
By David Kiley (Kiley is a senior correspondent in BusinessWeek's Detroit bureau) Source: - ONLY REGISTERED AND ACTIVATED USERS CAN SEE ALL LINKS - CLICK HERE TO REGISTER - JUNE 28, 2006

New CEO Dieter Zetsche aims to beat Lexus in quality, make the Smart division profitable, and lift Chrysler's productivity -- and all by 2008



Will he succeed??? Let's wait and see shall we?

For a man in the top job at the German automaker just six months, DaimlerChrysler chief executive Dieter Zetsche is setting some hard-to-reach targets for himself. By 2008, says Zetsche, in a wide ranging interview with BusinessWeek, Mercedes-Benz will match or beat Lexus in J.D. Power & Associates quality ranking. The beleaguered Smart car division will be profitable. And Chrysler Group's productivity will be ahead of Detroit rivals Ford (F) and General Motors (GM) and be all but tied with Toyota (TM) and Nissan (NSANY).

Zetsche, who had successfully led Chrysler, took over the Mercedes-Benz division last September after being tapped to succeed former chairman Jürgen Schrempp last January. Mercedes-Benz chief Eckhard Cordes left the company after being passed over.

NEED FOR SPEED.

And Cordes had been tapped after former Chrysler chief operating officer Wolfgang Bernhard was tapped to run Mercedes, but was forced by Schrempp to leave the company before he could officially run the division. Zetsche opted to run the brand himself and says he is pushing the organization to run faster when it comes to quality. "Mercedes can only be in one spot when it comes to quality, and that is number one," says Zetsche who says he plans to match or beat luxury leader Lexus in Power's influential Initial Quality Study ranking in just two years.

The Power IQS Study was just overhauled so that "things gone wrong" are measured separately from design quality, or how well a car is designed and packaged. Mercedes, which has suffered quality setbacks in recent years, where it came in tenth behind Lexus in 2004, bounced back to third place last year. But the complexity of Mercedes in-cabin electronics, under the new study formula, set the venerable brand plummeting back to 26th in the 2006 ranking released earlier this month. "We aren't making any excuses," says Zetsche. (J.D. Power is a division of The McGraw-Hill Companies, which also owns BusinessWeek.com.) Chrysler Group edged GM and Ford in factory productivity in this year's Harbour & Associates influential study. The firm does not publicize productivity rankings of European factories. Zetsche, who is responsible for leading Chrysler's resurgence the last five years, says he believes Chrysler can "close the gap with Toyota and Nissan to the point where the gap is meaningless" in the next two years.

STILLBORN MODELS.

A big thorn Zetsche inherited from his predecessor is the Smart car business (see BusinessWeek.com, 6/27/06, "DaimlerChrysler's Smart Move"). Since being launched in 1998, the division, best known for producing the tiny two-seater fortwo minicar, which is sold in 33 countries overseas and in Canada, has lost about $5 billion.

Zetsche, though, drove a restructuring of the business, which included canceling two models, an SUV, and roadster, and concentrating on the minicar for now. DaimlerChrysler (DCX) took a one-time charge last year, with Zetsche, say company insiders, pulling forward a few years of expenses. Zetsche says Smart will at least break even in 2007, with a definite operating profit to follow in 2008.

Overall, in 2005 DaimlerChrysler generated of more than $177 billion in revenue and gross profits of and total net income of just over $3.4 billion, according to Hemscott. Zetsche has given guidance of $6 billion in total net profit for 2006. He has a stretch goal of achieving a 10% return on assets by 2010.

READY FOR HIS CLOSEUP.

He admits that while he is enthusiastic about 10 new models coming from Chrysler this year, he is not satisfied with the performance of the division, which has the highest unsold inventories and highest consumer incentives in the industry. "We still have a perception problem with our brands," says Zetsche. "We have made great strides with designs like the Dodge Caliber and Chrysler 300 (see BusinessWeek.com, 12/28/05, "2006 Chrysler 300C SRT8"), but many still view us simply as part of Detroit…Chevrolet, Mercury and Chrysler."

Most people do not associate Chrysler with being part of DaimlerChrysler and a German-American company. To help remedy that, Zetsche, with his German accent, will appear on television ads starting this weekend talking about Chrysler brands. The ads will be tagged with summer sales offers to help clean out the unsold inventory. "I've avoided appearing in ads for five years, but the time has come," Zetsche laughed. Chrysler's most famous CEO, Lee Iacocca, was a fixture in ads during the 1970s in his successful effort to turn the struggling brand around.

Numbers aside, Zetsche says he has been working hard on adjusting the culture at DaimlerChrysler's Stuttgart headquarters. He has shifted executive offices from a castle-like structure to the same building where the cars are actually built and closed executive dining rooms. He made similar changes at Chrysler Group. "We are overcoming the tendency people here had of thinking you could sprint for three months to get a vehicle launched and then sigh and relax," says Zetsche. "This business isn't a sprint it's a marathon." Schrempp's style was imperial in comparison to Zetsche's team-oriented approach. "It's a culture shock," he admits.

"SPORTY AND COOL."

Besides driving the organization on quality, Zetsche says he is moving to better focus Mercedes-Benz's image and product portfolio. Under Schrempp, the division expanded into entry-level cars like the A-Class in Europe, Smart, and SUVs and crossovers in the U.S. "We're going to narrow the portfolio a bit and concentrate on what we are," says Zetsche. He singled out the recently launched R-Class crossover, which looks somewhat like a large station-wagon, as a model that is far afield of where Mercedes is going.

Zetsche said Mercedes will not be trying to be "sporty and cool" to compete more evenly with BMW and Audi. Instead, through new products and marketing, Mercedes-Benz will be emphasizing, style, comfort, and engineering. He summed up the strategy with the word, "appreciation." Said Zetsche, "We want customers to know that we very much appreciate them, and we want them to appreciate Mercedes for what we are and what we can do." As for a sporty image, he says, "I will leave that to the others…Mercedes should stand for and be for people who have arrived, and we shouldn't back away from that." Zetsche, known for his sense of humor, is quick to add. "It all depends on how you define young at heart in this business. We won't take it too far. No one wants to be seen as an old fart."


Will the 3-Pointed Star regain its luster?

Curb Zone

 

The Artist

Zetsche said Mercedes will not be trying to be "sporty and cool" to compete more evenly with BMW and Audi. Instead, through new products and marketing, Mercedes-Benz will be emphasizing, style, comfort, and engineering.
..........
Thats what i like to hear

ZicZachZo

Here in SoCal the marketing for the C class is nothing but the C230 with the sports package. I guess it's different in every market. But this seems like a good plan for Mercedes none the less. I hope that he can turn things around like he did at Chrysler. The CEO shakeup looks like it was a mess. I can just imagine what went on behind closed doors... Good for MB.

Merc1

Sounds good, but some of it seems to be at odds with MB has been doing lately with some of their cars. Sportier handling, steering, brakes etc. have all been done in recent months, but this is good for MB because it was never about matching handling with BMW/Audi it was about exceeding them in quality, comfort, engineering and safety.

I'm not worried about any of that because the S-Class shows that Mercedes is still on its best game.

Beating Lexus in these surveys though is another matter. I don't see how they can do it in just 2 more years. Cordes made this same type of promise and then had to go back on it.

M

Hypersonic

With all due respect to Herr. Zetsche, I don't entirely believe that Mercedes is not trying (at least a little bit anyway) to be "sporty and cool" -- obviously to appeal to younger buyers ...the new models speak for themselves, they very much are influenced by both BMW and Audi.

Yannis

Ouch that's going to hurt. No Mercedes fan will ever admit that even if it's true.

Merc1

Yeah that is what I saying in my earlier post. Newer Mercedes models have definitely been influenced by BMW and Audi in the regard of being sportier, moreso BMW than Audi. He may be talking about design not driving dynamics.

M

Merc1

No Yannis everyone isn't a fanboy for Mercedes like you are for Audi. The problem is that you'll take Roberto's comments and run with them like Mercedes' are now aimed directly at Audis or something else rediculous like that. That is what Mercedes fans would object too, not what Roberto said.

M

The Artist

Audi is GAY.. lol j/k hihi

Imhotep Evil

Me too.
Altough I'd have to agree with just about everything that Merc1 said in this tread.


OMG, the end of the world is comming.
Repent for your sins, while you still can.

Curb Zone