MONTVALE, N.J. -- Two years from now, Mercedes-Benz USA will be a different company with "a new level of energy," CEO Steve Cannon said.
The company is preparing to move its headquarters to Atlanta this summer with a team of about 200 current employees. They will train the new two-thirds -- employees Mercedes-Benz will hire to replace those left behind, Cannon said.
"I have invited the team coming down to leave the baggage. We have this chance to start fresh. If you have a process that is cumbersome, leave it here.
"You have the invitation from the top to leave the inefficiency behind you. We have been in the same place for 50 years, and there is legacy everywhere," he said.
Cannon, 54, was interviewed on Thursday, April 30, by Staff Reporter Diana T. Kurylko at Mercedes-Benz's headquarters.
Q. What are your forecasts for the U.S. vehicle and luxury markets this year?
A. Overall the market is strong, the strongest we have seen since the downturn. We are seeing a 17 million SAAR.
We have come off a good first quarter but one that was held back by weather across the country. We are finally thawing.
We are strong in the West, but the New York market still hasn't come out of its winter thaw. The net of this is that we see a strong year in the luxury space. Luxury and general market tend to be on par with each other.
What do you see as the trend -- more incentives or managing production better? Your competition has been waging an incentive battle.
For us, it is about profitable growth. We are not chasing titles for the sake of titles. If we finish the year having grown -- and grown profitably and successfully launched a number of new cars -- and if we are in the No. 2 luxury sales position, then that is just fine. We strive to be the best. But we are not going to chase No. 1.
Has the fervor over your new CLA compact sedan and GLA compact crossover died down? What kind of monthly sales can we expect to see from those additions to your range?
By midyear -- and we are not there yet -- we should find that natural level. We still have markets that need to be fed with more product.
We are closer to our natural run rate with the CLA than the GLA. The GLA is newer in the market; it did not get the kind of launch emphasis that the CLA did because we launched it at the same time as the C class. The C class took most of the oxygen out of the room. We are loving what those products are doing for us.
Are the conquest rates still high for those new models?
For all of 2014, it was 74 percent for the CLA. The GLA is lower at 66 percent. But most important for both of them, 70 percent of those conquests were from nonluxury. We are getting an owner coming out of a Volkswagen or a Toyota or a Nissan.
So what's a good monthly sales rate for the CLA?
We think CLA is closer to its natural run rate of 2,500 to 3,000 units. GLA sales will increase a little bit. CLA has had more time in the market.
Will the GLA reach the same monthly sales rate as the CLA?
It will be slightly less vs. the CLA.
Sales of 6,000 compact vehicles a month are a healthy boost.
Yes, it is, and we are just getting started. As that platform progresses in three, four years, you will see new variants coming. I'm not prepared to talk about that yet.
How are you doing against competitors?
CLA has 63 percent of its segment where it competes with the A3 and the 1 series. It is a difficult segment with high trim levels of mass-market products. The market is enormous in that $30,000 to $35,000 segment. That is a key battleground of luxury brands moving into the high end of the mass space. That trend will continue for the next five to six years.
How is the new bigger, more luxurious and more expensive C-class sedan selling? Is it cannibalizing sales of your larger vehicles?
The C-class buyer is a more mature and slightly more upscale buyer. The buyer average household income is up 20 percent to $150,000. It is a very sophisticated car. We are on track for a terrific sales result.
You have more C-class variants coming, the coupe and all-new convertible. Will there be substantial substitution for the sedan?
The variants come next year -- will be a little bit of substitution. A coupe buyer is a coupe buyer vs. a sedan buyer. By September of 2016, the C-class offering will be complete, and we will have our first convertible.
You'll be leaving New Jersey in a few months to move to the new headquarters in Atlanta. How many people accepted the offer to move?
Sixty percent of those who were offered. We put out an offer to a number of people, not every single job.
We are moving in two waves. There are 300-plus people staying here for the next couple years, and we haven't decided who of those folks, in the next 2.5 years when our new building is complete, will relocate. Wave 2 we will address in a couple of years.
How many people from the first wave are going?
We will relocate about 200 people.
Do you see disruption in your business?
A number of people will be separating on June 30, but, depending on the function, we asked some people to stay longer -- three to six months -- to give us breaking room to hire and train talent in Atlanta.
What will you tell dealers at the meeting this June in Las Vegas?
The neat thing is we are showing nine new products at a national dealer meeting. Some are next-generation and some are all-new -- not face-lifts; some are new segments. I am giving them a deeper look into the future. It goes out as far as three years, which we normally do not do. We are bringing actual cars.
Why pull the curtain back so far?
To remind them. We have been in this product launch mode for the last several years. I want to send a message clearly that we are not running out of gas. We are still in the early beginning, and this will push through 2020.
Are you preparing for an increase in interest rates? The experts say they will go up this fall.
Yes, we are preparing for an increase in rates. It is a question of when and not if. It will have an impact on business -- higher rates -- that means higher monthly payments and that means to get to a certain price point, we will ask more from the customer. That may have a damping effect on sales. The cost of money goes up, and so do interest rates. It will put pressure on incentive budgets.
Any update on whether the pickup truck will be sold in the United States?
No, we haven't even begun that project. We are crunching the numbers on what we see as an opportunity -- and does it make sense for us in this marketplace.