Lieb's fall stuns M-B dealers
Former exec led charge to catch BMW in U.S.
 | Lieb: Out -- and details are scarce |
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The fall of Mercedes-Benz USA boss Ernst Lieb amid a "zero tolerance" crackdown on ethics violations at Daimler AG stunned many U.S. dealers, who liked the 56-year-old German and raved about the job he was doing. Lieb was fired last week, ending a five-year run as CEO during which he bolstered the U.S. sales arm and enjoyed the backing of dealers -- and, until last week, his bosses in Stuttgart.
Daimler officials made no public comment on the reasons for Lieb's dismissal, and Lieb could not be reached for comment.
But a company source in Germany said Lieb was dismissed for using company money for private expenses -- infractions that came to light as part of a companywide effort to root out corruption after Daimler's global bribery scandal was settled last year.
"Things that people did in the past are no longer tolerated," said a company insider in Germany. The source said several other Daimler executives have been discharged in the past years, but Lieb was the only one in the United States. He said no other dismissals are expected at Mercedes-Benz USA.
Another company source confirmed a published report that said Lieb was accused of charging to the company a personal trip to Australia.
Herbert Werner, 56, vice president of finance at Mercedes-Benz USA and the only German on the U.S. executive team, was named interim CEO. Late last week a Daimler source said a replacement would be announced within a "few days."
Under Lieb, Mercedes had nearly closed the sales gap with rival BMW in the United States. In 2007, BMW outsold Mercedes by about 40,000 units. Last year, BMW led by 3,728. Through September, Mercedes trailed BMW by about 7,500 units, with sales of 170,058 vehicles. The totals exclude Mercedes' Sprinter commercial vehicle.
Some dealers say they were shocked by Lieb's departure.
"He was the best thing that happened to Mercedes-Benz," said Ray Catena, CEO of the Ray Catena Auto Group, which owns 14 luxury dealerships in New York and New Jersey. "He brought life into Mercedes and built up a good organization and kept things going great."
Lieb succeeded in pushing through a controversial facilities improvement program for Mercedes stores. The company had long proposed new standards, but Lieb got most dealers to accept the brand's Autohaus program -- even though not all dealers were pleased.
About 300 of the 355 Mercedes-Benz dealerships in the United States have adopted the standards or built new stores, spending a combined $1.4 billion since 2008.
'Believed in Ernst'
Catena said Mercedes had pressed dealers for at least 12 years to upgrade their stores, but it was Lieb who persuaded them.
"Everyone believed in Ernst, and he got it done and dealers made the investment and did what they had to do to make the business better," he said.
Meanwhile, Lieb pushed Stuttgart to give the U.S. arm the product to challenge BMW's domination of the compact luxury segment. Lieb convinced his bosses that large luxury-vehicle segments won't grow much because of demand for more fuel-efficient vehicles and the changing lifestyles of baby boomers.
He was a proponent of the C-class coupe that debuted this fall and C-class derivatives that will follow in 2014. To lure younger buyers, Lieb was preparing to add the front-wheel-drive A- and B-class cars in 2013.
Mercedes has been improving its scores in the National Automobile Dealers Association dealer attitude survey. In the winter 2011 survey it was tied for fifth place. In the summer 2005 survey, Mercedes ranked 20th. The survey measures dealers' satisfaction with their manufacturer's policies, field and headquarters staff and franchise value.
Before coming to the United States in September 2006, Lieb was head of DaimlerChrysler Australia/Pacific and previously had been CEO of Mercedes Canada. When he arrived here, Lieb traveled across the country, dining with groups of customers and encouraging them to discuss problems. And dealers said he would sit and talk with them for hours.
They say they admired Lieb's infectious style and openness. He frequently talked about his children. Mostly, they say, he listened.
"I have seen nothing like that in the 30 years I have been a Mercedes-Benz dealer," Catena said.
Climate of compliance
Sources say Lieb ran afoul of Chairman Dieter Zetsche's zero-tolerance policy, put in place soon after the company paid $185 million in April 2010 to settle criminal and civil charges brought by the U.S. Department of Justice and the Securities and Exchange Commission.
The government charged that from 1998 to 2008, improper payments of at least $56 million were made to officials in at least 22 countries to obtain government contracts for Daimler vehicles.
Former FBI director Louis Freeh has been directed to "evaluate Daimler's compliance and ethics program" and to examine corporate files and documents and hold discussions with employees, according to the company.
The zero-tolerance policy is "part of what we agreed on in 2010 ... more ethical behavior, no bribes, and do not use company things and money for private interest," a Daimler source said.
Daimler would not provide details on Freeh's activities or say whether he was involved in Lieb's case.
In February, Daimler expanded its management board to seven members and appointed former German judge Christine Hohmann-Dennhardt to a new post, giving her responsibility for "integrity and legal affairs."
Sources close to Daimler say the climate is one of rigorous enforcement of the rules. According to one, Daimler must list the customers invited to events. A sales executive in Germany said: "If the value of such an invitation exceeds a certain amount, and it may merely be a presentation of a new car in a sales facility or a ticket to a sports event, it could actually be construed as bribery."
U.S. dealers say they are disappointed by the turn of events. Last April, Lieb organized the first U.S. dealer meeting at Mercedes headquarters in Stuttgart. Dealers among the 600 attendees said they were given unprecedented information about future Mercedes products and strategies.
The event "was an amazing show," said Rod Ryan, CEO of Open Road Auto Group of Edison, N.J., which owns 17 dealerships in New York and New Jersey, including a Mercedes store.
"It has been a pleasant relationship with him, and it has been short-lived," Ryan said. "I am disappointed and shocked."
You can reach Diana T. Kurylko at dkurylko@crain.com. -- Follow Diana on 
