Ernst Lieb, CEO of Mercedes-Benz USA, says his company's sales could improve as soon as this year's third quarter. Mercedes is pinning its hopes on the new GLK compact SUV, the next-generation E class that goes on sale next month and two hybrids that arrive this year.
Since Lieb, 53, took the top U.S. job in late 2006, he has picked a new executive team, restructured dealer margins, placed renewed emphasis on customer satisfaction and introduced a controversial dealership-upgrade program. He spoke with Staff Reporter Diana T. Kurylko last month at Mercedes-Benz headquarters in New Jersey.
After a tough first quarter, what does Mercedes-Benz expect for the rest of 2009?
Last year we had a very good start. By the third quarter it got bad, and in the fourth quarter it got really bad. I think we will see a third and fourth quarter this year like we had in the first and second quarter of 2008. At least sales may stabilize. That would be a very good sign.
Is the launch of the new E class an opportunity or unfortunate timing?
It is a great opportunity to launch it in a market that is down, where every sale counts. The car has always been our bread and butter. Profitwise, it is very important to the organization, and our customers are extremely loyal. This is the right price-value proposition for them.
Why did you replace the smaller CLK with the larger E-class coupe?
Years ago, the E-class coupe was derived from the E-class sedan. That's what we've done here. You can expect a stiffer car with a bit more performance. Customers want that.
Will the E class have a strong lease package from the start?
We would like to see the lease-penetration rate in the 50 percent range, compared with the [current] rate in the upper 60 percent range. As a rule, in the last year of a vehicle's production, the penetration rate goes up. People may do a 24-month deal because they are waiting for the new car.
Sales of the GLK have been good since its launch in January.
It's a bit of a surprise. We had 50 percent of the segment in March. We did not think sales would be in that range. It's the right size; it doesn't look like everybody else's; and it handles like a passenger car. Female drivers like that. It's small but still an SUV.
The C class is down, but not as much as the segment. Is that because of incentives, or are buyers stepping away from larger vehicles?
In this market, there is no way around it. You have to make your product a bit more attractive, but not to the extent some of our competitors have. C class is a volume model for us, and it's where we can help dealers make up lost sales.
What do you expect from your new hybrids, the ML 450 and the S class?
There will be a price premium on those cars higher than on the diesels, to recover some of the expenses. The ML hybrid drives very differently from some of the competition, like a typical Mercedes. It comes at the end of the year. The S-class hybrid comes in September. It is a mild hybrid, so it's a bit different.
I don't think we will sell a big number of either. But it's important for us to say we have taken the technology on the market and translated it in the Mercedes-Benz way.
Will the GL freshening for the 2010 model year give it new life?
The GL is the most American car we have. It's a seven-seater that drives like a passenger car and comes in various engine sizes. Our face-lifts are never a radical change but an evolution. Usually you see an uptake in sales when we do that.
Why are sales of your sports cars, such as the SL and the SLK, down so much?
They are dream cars. But when people have to watch their cash positions, it's the first thing they look at. They are doing relatively well in relation to what's happening in the overall segment, but sales are hurting. We're cutting production back to adjust.
As you cut allocation, which models do you slash the most?
The S, SL, CL and CLS -- segments that are down 60 to 70 percent. Those are the ones we have to watch.
Do you expect more dealers to drop the Maybach brand?
We are selling at the market maximum now. We sold 130 last year, and it is hard to say how many we will sell this year. We've had a large reduction over the past two to three years, jointly done with the dealers. I would assume we will see a few more handing it back.
Do you have to compensate them?
No, it's a voluntary termination. We have 37 Maybach dealers. We'll end the year with a count in the low to mid-30s.
Is Mercedes thinking of eliminating Maybach?
There will be a face-lift, but not before 2010. Everything is being looked at, such as whether we should still build a V-12 engine or have a V-8 with a turbocharger.
How are you proceeding with your Autohaus facilities-upgrade program? Are more dealers delaying their investments?
I would like to say it was planned that way, but it wasn't. It is a three-year program. With this recession, that is working quite well for us. All a dealer had to do was submit plans at the end of 2008, which the majority of dealers have done.
This year, they get the permits and find the property and start construction so that they are finished by the end of 2010. I have just signed Autohaus bonuses for 12 facilities.
What percentage of your dealers have agreed to do Autohaus?
Out of 346, 297 have agreed and about 60 to 70 have finished. We had a goal of 70 to 80 percent. Of course, you don't know how many of the 297 are actually going to do it. Another 10 are working on plans with us. A small number of dealers do not want to do it -- I wouldn't put that number higher than 10 to 15.
How big will the dealer investment be?
We figured it will be about $14 billion for the dealers. It will cost us $250,000 to $280,000 in bonuses.
How is your program to boost customer satisfaction proceeding?
The results speak for themselves. We went from 20th to 12th in the J.D Power and Associates Customer Satisfaction Index. That is a huge step. The key is not to get there as quickly as possible but to sustain it.
Are you still talking about bringing in products from the smaller B-class car family?
There is no final decision. Over the years, we've shown B-class works in Europe. You can debate whether the past or current product line would have appealed to U.S. consumers, but we will have different-looking models in the future. You saw a little of that with the [B-class] concept in Detroit. There will be alternative powertrains, like fuel cell or electric. We have to offer them whether fuel prices go up or down.
When do you have to make the decision if the product is debuting in Europe in 2012?
We have time. We made it clear that we need the option of bringing the product to the U.S., and that it must fulfill U.S. emissions and safety standards.
Are you considering the hatchback?
It has been proven over and over again that it won't sell.
What are you going to do with the R class? In the first quarter you only sold 355 of them.
Customers who buy it love it. It is what it is. We don't push it on the market. In some other markets, it has picked up. In China, it is selling really well. From a production point of view, we are OK. There is a face-lift in the planning.
Will you extend your diesel range?
When gasoline prices are below $2 for regular, obviously that has an effect. You saw the E250 on stage [at the New York auto show] -- 44 miles per gallon.
Is E class the right car for that engine? Maybe not, but we could offer that engine in the C class or the GLK.
You've been CEO for three years and have made some drastic changes. What is your next high priority?
In this industry, three years are nothing. Dealerships won't be revamped in three years. We will do the same thing over and over again until we succeed. We need to be predictable from a dealer perspective. We need to fulfill the dreams of our customers. By changing direction every five years, we will not get there.