Since Ernst Lieb took over as CEO of Mercedes-Benz USA in August 2006, he has instituted new dealership facility standards and made a big push for improved customer satisfaction and dealer communications.
The 54-year-old German native also has lowered prices on the redesigned C- and E-class cars, which forced BMW to react with lower prices of its own.
Lately, Mercedes has been outperforming its luxury competitors. In April, sales were up 26 percent compared with April 2009. Lexus was up 21 percent, and BMW was up 9 percent.
Before taking over at Mercedes-Benz USA, Lieb was CEO of DaimlerChrysler Australia/Pacific. Before that he ran Mercedes-Benz Canada. He was interviewed May 11 at Mercedes' U.S. headquarters in Montvale, N.J., by Staff Reporter Diana T. Kurylko.
A year ago, you were running third in a three-way race with BMW and Lexus in U.S. sales. This year, you are first. What happened?
There are several reasons, and one is product. The leading force is clearly the E class, up 128 percent year to date because of its quality and looks. The pricing is right. The coupe has worked very well. M class is doing stronger than in the past; it is up nearly 30 percent. GLK and GL are doing strong -- our SUV package in general is doing very well.
Secondly, our dealers have done a marvelous job when it comes to CSI and the entire customer experience. In the first quarter, we were among the 10 best in every major survey. We have never had that before.
Which surveys are you referring to?
J.D. Power's SSI, CSI, APEAL studies -- there are nine we monitor. We're aligned with our dealers, we put emphasis on quality and have created a structure where they had to focus on it.
How are your relations with dealers? You have improved communications with them, you've eliminated some difficult processes, and you've made it easier for dealers to make warranty decisions.
We promised dealers we would clean up our act, and that's what we've done.
Your sales were up 26 percent in the first four months of 2010. Will we see a 25 percent increase for Mercedes at the end of the year?
That's questionable. If our sales continue increasing in the range of 10 to 15 percent, we would be very happy.
What is your outlook for Mercedes in 2011?
We will get a lot of new product in 2011, and it will be spread over the year. We'll have a new SLK on the market in April and a new M class midyear. We still have fresh product -- the E class won't be too old. The key driver will be what the market will do. If it goes in excess of 12 million, I would assume we'll have a positive effect. We need stabilization.
What is your outlook for the total U.S. market for the rest of this year?
We are still holding onto a forecast of 11.5 million to 11.8 million, but the market isn't really tracking that. April was about 11.2 million.
The E class, which was redesigned a year ago, is still selling well. At launch, you lowered the price about $4,600 compared with the previous generation. How much of a factor was your aggressive pricing?
The product quality is outstanding. The looks were received very well. Our pricing was a necessity because of the market, and we knew what we had to do in terms of lease support. Our strategic goal is between 45 to 50 percent [lease penetration], and we're running at that level. Our pricing put a lot of pressure on some of our competitors.
The big GL SUV is still selling well. In fact, all of your SUVs are doing well. Why is that?
We see the most benefit in terms of our customer satisfaction, reliability and product quality improvement on the SUV side. That's why we're gaining with a 6-year-old M class. With the smaller GLK, it's pricing and looks. The GL sells because Americans always need bigger cars. The GL is a fantastic alternative to some of our domestic competitors, who used to own the segment. It drives like a Mercedes-Benz, and the fuel consumption is good. That's why the GL is still doing very well.
How are your S-class and ML hybrids selling?
The S-class hybrid is going very well. It's an additional model and it's consistently 10 to 20 percent of the model lineup. It's also the entry-level S class.
The ML450 hybrid is being hampered because we're only leasing it for 60 months. The battery technology is changing so quickly, you can't leave that risk in the hands of the customer. Because of that, there is only a limited amount of models available for lease.
Will we see diesels throughout most of your range?
The E-class diesel is coming in September, and we'll see it in the C class in the next model in 2013. In the GLK, we'll also have it.
When will we see new four-cylinder engines in the United States? Will they debut with the new B-class cars and the new-generation C class?
We'll start with four-cylinders in the B class and the C class in 2013.
A few weeks ago, key dealers met with Mercedes executives in Germany about a proposal to make nearly all of the 2013 S-class models hybrids. Some dealers say U.S. buyers don't want this. Will Stuttgart forge ahead with plans or modify them in light of the U.S. concerns?
The only thing I can say is that it was a very constructive meeting. Everything was brought to the table and discussed in detail. The decision will be made by our people in Stuttgart, and it depends on the worldwide situation.
We are the second-largest market for S class; China is bigger than the U.S. You need to consider what is going on worldwide. [Fuel economy] requirements in Europe are significantly different than in the U.S. But in 2016, with the changes we will see here in the U.S., we'll get a lot closer to Europe.
That car will go into production in 2013 or 2014 and run for seven years.
Mercedes is spending $27 million to give the R-class crossover a new face. Is this the last chance for this slow seller?
We introduced the new R class at the New York auto show, and it has received a lot of positive feedback. I am optimistic we will do quite well because it now looks more like an SUV, and it fits better in the overall lineup. The segment has also gained strength with some new entries from BMW and Cadillac.
Can you give us an update on the Autohaus facilities upgrade program?
We are on target. About 90 facilities are done. We opened a new one two weeks ago in Chicago. It is stunning and unbelievable. We have 60 to 70 under construction. An additional 100 dealers will have their renovations and construction done by the first quarter of next year. The total number will be 280 out of 357.
A certain number of them just built new facilities, and others said they simply will not do it. Some are still sitting on the fence, but the program will run out at the end of the year. I don't know of any manufacturer who tried to remodel their network in this country in three years to the extent that we have.
Has business in these revamped dealerships increased?
Absolutely. My poster child is in Augusta [Ga.] and owned by Group 1. It used to be a really old facility. It's not a big store, but they are outselling every competitor in their market, and they never did that before. They changed their image, appearance and customer expectations.
When the new models come onto the market in the next two to three years, they will have an advantage over everyone else. It will pay back big-time.
Today, the dealer board is convinced Autohaus was the right move. They have seen the benefits. It was tough in the beginning but so be it.
How will Daimler's cooperation with Renault/Nissan affect Mercedes in America?
It is very new. The initiative was formulated in Stuttgart and Paris. In March we began sharing with BMW [the vehicle preparation center in Baltimore that inspects, repairs and prepares shipments to dealers]. We will process 60,000 BMWs in the Baltimore facility for BMW. It is going well.
Why wouldn't we look at doing this with another partner? We haven't talked about anything yet. If there is an opportunity for us to look at VPCs or joint freight, we should do it. It is all behind the scenes, and it has no affect on our customers and dealers. As long as we keep our quality and improve it further, I see no issue.
Are there other ways you can cooperate with BMW?
We want to use this one as our guinea pig. Once we have mastered this -- and we need a few more months -- we will have discussions about other possibilities. We just opened our new VPC minutes way from BMW's in New Brunswick, Ga., so who knows?