Mercedes-Benz launched five vehicles last year, tried to beat BMW for the No. 1 luxury brand title, fired its CEO after alleging ethics violations and appointed the vice president of sales to take his place.
And those were just the highlights. The brand also added a C-class coupe and promised dealers more C-class variants to make the range truly competitive against the BMW 3 series.
But profits continue to be an area of concern, and dealers have launched a study to find ways to make their returns as good as those of Lexus, BMW and Audi dealers, said Michael Cantanucci, chairman of the Mercedes-Benz Dealer Board and owner of three Mercedes-Benz stores in Connecticut and Florida.
Staff Reporter Diana T. Kurylko spoke with Cantanucci.
How was 2011 for Mercedes-Benz dealers?
It was a very good year. Sales volume was up. We ranked in the top 10 on all J.D. Power major syndicated studies. Market share is still increasing to the highest level ever.
What are the biggest issues Mercedes-Benz dealers face this year?
I don't know if the word issues is one I would choose; I'd say objectives. One of the main objectives of the Mercedes-Benz Dealer Board is dealer profitability -- increasing it. We have established a subcommittee that we call Milestones for Profitability. We will be doing profitability modeling. We want to be the best in the Tier 1 luxury brands.
Where do you rank today?
Presently Lexus is No. 1, Audi is No. 2, BMW No. 3 and we are No. 4. Our objective is to increase dealer profitability and to be best in class. We have seen quite a nice increase in the last two months at Mercedes-Benz because of increased sales volume and new models. We will study it carefully.
Any preliminary conclusions?
We will be doing a deep-dive analysis into Tier 1 luxury brands and comparing ourselves so dealers can get a fair return on their investment. We are working in a cooperative spirit with Mercdes-Benz USA as a dealer board with this Milestones for Profitability subcommittee.
When will the study be completed?
The initial timetable is to finalize our study by the halfway point of 2012.
Any other major initiatives?
Some things that we did in 2011 we will continue, such as the CustomerONE Driven to Lead training. It is in-depth training for dealership management and dealership personnel at all touch points in the dealership to elevate the customer experience. Mercedes-Benz USA has put it together and dealers have been attending. I am getting very positive feedback from the dealers that it is one of the best training sessions that their employees and managers have participated in.
How does it work?
It is in-person. The dealers attend. They have training sessions scheduled through the year in different parts of the country and the management and staff travel to participate -- dealer principals, management staff, personnel excluding technicians from phone reception to service advisers to sales, sales management and MB USA personnel.
How does the change in CEO affect dealers' relationship with Mercedes-Benz?
With Stephen Cannon we continue momentum without interruption. Steve has built relationships with the dealer body that run deep. The continued momentum is important because we want to accomplish some ambitious targets together. We have every confidence that we have the right leadership in place and we will achieve our objectives. We are happy and excited about his promotion and we feel he is the right choice. If someone came over who was unfamiliar with the market, the competition and the dealer body, you are looking at a one- to two-year learning curve to bring someone up to speed. I think this was the right decision.
Steve called on Jan. 3. I was the first call he made. I was very pleased with the fact that he reached out. He has a very organized agenda. He is impressing me. He has broad experience.
The freshened C class is on sale and you have a C-class coupe for the first time. How are sales and what more do you need in this segment to be competitive with BMW's 3 series?
We are doing extremely well -- the car is selling the car. What is the one model we are missing? The convertible and we will have it. I don't know when in the life cycle but we will be getting it.
Does Mercedes-Benz have an adequate presence in the crossover/SUV segment?
We are very successful with the GLK. We are OK for now. I hope there will be more coming that fill this category.
Will the MLC two-door version of the ML SUV be a big seller?
We think it will do well and it will bring a new buyer.
Are you competitive in the hybrid/electric arena?
I would like to see more vehicles coming. I believe that there is a market for them and they will sell. I know that these models are being addressed.
Mercedes will be adding more diesels. Is this the right strategy for the United States? Are they selling well?
The diesels are selling very well. It is a wise strategy for manufacturers to explore different paths.
Give us an update on preparations for the A- and B-class small cars due next year.
We believe that the customer coming in to look at these vehicles will be interested in technology, so equipping sales consultants with iPads and modern applications is a common sense approach. Each dealer is looking at his operation and preparing in his or her own way to get ready for a customer that we have not seen before so we can maximize this opportunity. That could range from sales personnel to compensation plans for salespeople. It varies dealership to dealership and market to market. I have heard some dealers talk about going with a salary-based compensation plan.
This is an entrepreneurial rich business and we have great operators that make the most of their opportunities in their own ways.
The Autohaus facility improvement bonus of $400 per car for three years has expired. Is Mercedes continuing some kind of bonus for dealers who improve or build stores to the Autohaus standard?
The Autohaus bonus was replaced with the brand standards bonus. Eligible dealers get an extra 1.5 percent margin for three years. The end of 2011 marks the first of three years. The base margin at the end of 2010 was 13.5 percent.
How is the larger E class doing?
The styling and the quality are great. We are seeing growth in the segment. Things are very good right now.
Are dealers making money on new-car sales?
Yes, and the profits are getting better.
Have the streamlined optional extended warranties helped?
Yes. It is a win-win for the customer and the dealers.
Are those pre-paid maintenance plans competitive enough with BMW's free maintenance?
BMW's is free, but if you are not able to offer something that is free, what we are offering is as good as it can be.
Does the certified pre-owned program work for dealers?
Yes. It is a good business model. There is a shortage of cars.
What are Mercedes dealers doing to attract more service business? Is the factory helping?
Yes, the factory is helping us watch this and analyze our operations. We're carefully pricing services, providing all the right amenities so the service experience exceeds the customer expectations and we build repeat and referral business that sustains us for the future. This is where the sale of the extended warranty comes in -- it's interwoven. By selling the extended warranty you are insuring the future success of aftersales.