The launch of the replacement S class is the biggest product news for Mercedes-Benz dealers this year, and many dealers already have orders for the new flagship, says Douglas Callahan, chairman of the Mercedes-Benz Dealer Board.
Dealers also are waiting for the fall launch of the GL, Mercedes-Benz's first full-sized SUV. Both products must be tops in quality - an important issue for Mercedes, whose reputation has been tarnished in recent years because of quality problems.
Not every new product has been an overnight success, says Callahan. The R-class wagon has confused buyers, and the price may be too high for a car used primarily by soccer moms, he says.
The replacement ML, on the other hand, has boosted dealer sales - since prior owners were assured the quality issues have been solved, says Callahan.
He was interviewed in mid-January by Staff Reporter Diana T. Kurylko.
What new Mercedes products are on the way?
We have some great new stuff. Everyone is looking forward to the S class.
The most exciting thing is we have a lot of advance orders. The new GL is exciting. It's a product that our customers have been asking for for a long time.
How did the M-class launch go? Are you attracting new buyers with the second generation of this SUV?
The launch was slow. The previous M class had some quality issues.
It took a lot of convincing to get people who had the previous ML into the new one. Once they drove it, they were convinced that it was like day and night.
We've heard R-class sales are slow. Are buyers struggling with the concept of a long crossover that's shorter than an SUV?
It is a totally new segment for Mercedes, and the market is taking some time to understand it.
I hope it turns around. It has been slow.
Do you need more product-oriented advertising for the R class? Ads showing the vehicle with the two founders of Mercedes-Benz have been criticized as confusing - no one knows who the two men are.
More advertising never hurt any product.
Is the high price an issue with that vehicle?
In a sense it is. It's a vehicle that is probably a second vehicle and is being used by the wife to take the kids around. It is definitely being used for carrying cargo and additional passengers. It wouldn't hurt to price it lower.
Why have sales of the C- and E-class cars been soft?
In the Northeast, the C class has been very good - we offer all-wheel drive. It is what people want. I can't speak for other areas.
E class also has all-wheel drive (as an option), and it has been very positive for us. In some areas of the country they can't get enough - such as Texas and California.
Does Mercedes-Benz have too many models?
We probably have the right model mix. Having said that, within those models perhaps we have some variants we can do without.
In the C class, perhaps we do not need the C350.
The C240 has been a good product for us. It becomes difficult from a dealer's point of view to stock all those models.
Has Mercedes-Benz remedied its quality problems?
Not completely, but it is on the right road.
With the new products - the CLS, the SLK and ML - quality has been phenomenal.
Quality is better in the new cars?
Our warranty cost is going down. It's a good and bad thing.
Would dealers like to see Smart cars sold in the United States?
Generally speaking, yes. It's another product for us. Dealers are not adverse to that. I am a New York City dealer, that car fits perfectly for us.
Should Mercedes-Benz restrict Smart sales to regions where it would sell?
Yes and no. Because of the possibility of low-volume sales, you need to offer it to every dealer instead of the way they wanted before with a new franchise.
This way it will be perceived as a Mercedes-Benz by the customer. If you sell it in New York and California, what about the guy who is driving cross country and now needs service?
So Smart should not be set up as a separate franchise?
The volume will be low with one or two models. I don't think it could carry a separate franchise. Why wouldn't you want 340 dealers selling your product, compared with only 50 dealers?
Why isn't your superluxury Maybach car selling?
Let's think about when the product was conceived - when you had dot-coms and the stock market was going on forever. A $300,000 to $400,000 car wasn't that unusual.
Now it comes out, and it is a different world. There are not enough people spending that kind of money. Some will still buy a Rolls-Royce, a Bentley. It is a small number of buyers, and that is kind of what hurt us. It is a great product. The timing was definitely wrong.
Are there too many Maybach dealers?
Dealers want to sell every product the manufacturer makes. I believe if you have 340 dealers selling your product you have a better chance.
I think it was important that they sell it at Mercedes Benz dealerships. You are creating a whole new image. No one knows what a Maybach is.
What kind of changes do dealers anticipate under the leadership of DaimlerChrysler CEO Dieter Zetsche?
In the U.S. market, having Dieter Zetsche (as CEO) is extremely important to us because he knows our market. It is different than the European market. The customer wants and needs are different, and the way they want their product given to them is different. He understands that. It is a definite plus for the U.S. market.
Are your residuals rising or falling?
Overall they are starting to actually increase - we have seen a 2 or 3 percent increase from Mercedes-Benz Credit on some of our residuals. The used cars are selling better.
What challenges do Mercedes-Benz dealers face in the next year?
The one we face every year is to be more profitable than the previous year. We are trying to maintain our volume and meeting and exceeding client expectations for our services. It is very true that the sales department sells the first car and the service department sells every other car.
What is the top priority of the dealer council in 2006?
Increasing dealer profitability.
Does Mercedes-Benz listen to its dealer council?
Oh yes, absolutely. I could call everybody.
That doesn't mean we agree on everything, but we can always talk about it.
My No. 1 thing when I became national dealer council chairman was communication between them and between dealers as whole.
What is the No. 1 thing the factory can do to help dealers?
They need to keep improving the quality. It is certainly going in the right direction.
What are the dealer council's top concerns?
To find ways to increase dealer profitability.
To keep the quality going in the right direction.
And it is getting better, but we need better availability of parts. We need to be able to get a part in a day or two.
How satisfied are dealers with Mercedes? Is their satisfaction improving or diminishing?
It's improving. It went up substantially with the last NADA survey.
Are your dealers making money on new-car sales?
Yes, we do make money.
Do your dealers have the right product mix and overall marketing strategy to be successful?
Yes, we have the best product that I have seen or been associated with since 1977.
Can you get the vehicles you want? Do you have to take many that you don't want?
Not every model sells as well as the other models. You do have to take some that aren't selling as well. Overall, we can get the models we need to sell and most everything sells fairly well.
Have you seen a decline in customers wanting fuel-chugging vehicles? If you offer a V-6 and V-8 SUV, are you seeing a shift toward more people buying the V-6 and sacrificing performance for fuel economy?
The V-6 generally has sold better than the V-8 anyway. We sell about four to five times as many V-6s as
V-8s. People appreciate the power in the V-8.
How important to consumers are safety features compared to other vehicle attributes, such as styling and performance?
It's the number one attribute for most people, especially with Mercedes-Benz.
Dieter Zetsche announced at the Detroit auto show that you will get five diesels. Is that good news?
I have mixed feelings. In New York, we can't sell them. That's the future for us. We have such a tremendous heritage in diesels, and they have come such a long way. They are powerful and not noisy, get good fuel mileage and run forever.
How does Mercedes handle local marketing?
Local marketing is done through the individual marketing groups in each region. It works very well in the New York region. They are flexible, and we work well together. They do a lot of ads for the dealers that are quite well done.
Does Mercedes' advertising work? Does the dealer council have a real voice in it?
Yes, we have a voice in it. They run most of the advertising by us first. The advertising does work. They kind of lost their way for a while, and now we are getting back to what works - about the product and our heritage.