Longtime Mercedes-Benz chief Jürgen Hubbert has launched an all-out quality drive as he prepares to hand over the company to Eckhard Cordes.
Mercedes quality has come under heavy criticism as the model range has grown.
Hubbert, who presided over the explosion of offerings, aims to fix the problems before he bows out.
He says Mercedes will accept lower profits in exchange for better quality.
Cordes, 53, has spent the last four years fixing DaimlerChrysler's heavy-truck business. He will take over from Hubbert on October 1.
Hubbert, 65, will become chairman of DaimlerChrysler's Executive Automotive Committee before retiring in April.
New vehicles delayed
But as a last hurrah, Hubbert is changing processes, auditing suppliers and even delaying new vehicles to iron out even small problems -- especially in the US, where Mercedes has slipped in quality studies by J.D. Power and Associates.
"We have organized the company in a new way to make quality the top priority," says Hubbert.
He says Mercedes wants to be tops in the J.D. Power and Associates Initial Quality Study by 2006. In the 2004 survey, Mercedes improved its ranking but still placed behind nine other brands, including Buick, Mercury and Hyundai.
Hubbert says DaimlerChrysler's management board has agreed to sacrifice some profitability to improve quality. "We have decided on ... technical changes, especially for the US," Hubbert says. "The board has agreed to go that route."
He says Mercedes has increased the size of its test fleets and dispatched quality engineers to suppliers "from Tier 1 to Tier X to monitor and make sure we get better quality from our colleagues."
He says such moves put an "additional burden on the results."
Close attention is being paid to issues raised on the J.D. Power studies in the US, Hubbert says.
For example, he says Mercedes will get more serious about poorly designed cupholders, problems with the trip computer and windshield wipers, and even brake dust.
"We will try to solve them by changing materials and components with a clear target to come back to No. 1 in the short term," he says. "I am absolutely sure they [buyers] will appreciate what we do."
Mercedes also is applying lessons it learned fixing various electronics glitches on the E class last year. Hubbert says Mercedes is working with electronics companies on solutions.
A new electronics architecture has been developed for the S class due next year that "will divide parts and not put it all together into a few computers."
According to a report by analyst Gary Lapidus of Goldman Sachs, "Mercedes management is now clearly focused on quality improvement, but it is unclear how long this process will take."
He says, "Our fear is that this program involves more postproduction inspection and rectification as well as process improvement throughout the system.
This could prove to be a burden on results for a number of years as these improvements will only come via new-vehicle programs."
Insiders say D/C is counting on Cordes to cut costs at Mercedes. Under Cordes' direction, D/C's commercial vehicles division eliminated 16,000 jobs and pressured the division's units to share more components.
Cordes, who is a close ally of D/C Chairman Jürgen Schrempp, was a key negotiator for Daimler-Benz's acquisition of Chrysler as well as D/C's stake in Mitsubishi Motors Corp.
Andreas Renschler, 46, head of the Smart small-car division in Europe, will succeed Cordes at the Mercedes truck unit.
Ulrich Walker, 52, former executive board member of Mitsubishi Motors, will succeed Renschler at Smart.
As expected, former Chrysler group COO Wolfgang Bernhard left the company. The D/C board decided not to give Bernhard the top Mercedes job days before he was due to replace Hubbert in May.