Mercedes-Benz dealers want to make things simpler in 2016, starting with training requirements.
The dealer body also aims to keep inventories under control as luxury sales flatten and increase the supplies of hot crossover models in the U.S., said Ken Schnitzer, chairman of the Mercedes-Benz Dealer Board. The brand hit another record for U.S. sales in 2015, and dealership profitability has improved, Schnitzer said.
But there's room for more efficiency.
"Mercedes-Benz is in the process of reviewing all their training requirements to see how we can streamline or regionalize training to make it more cost-effective for the dealers, and that's in process," said Schnitzer, chairman of Park Place Dealerships, based in Dallas. "It's an ongoing effort, and I would expect we'll make significant progress in 2016."
Mercedes reported U.S. sales of 372,977 vehicles last year, up 4.7 percent. Excluding commercial vans, the brand's luxury sales were 343,088, up 3.8 percent.
Schnitzer became chairman of the dealer advisory board on Jan. 1. He owns four Park Place Motorcars Mercedes-Benz stores in Texas, in Dallas, Grapevine, Fort Worth and Arlington. Schnitzer, 62, spoke with Staff Reporter Amy Wilson.
Q. How was 2015 for Mercedes-Benz dealers?
A. It was a good year for Mercedes-Benz dealers. The brand had another good year with record sales.
What are the major challenges for Mercedes-Benz dealers in 2016?
Getting the balance of trucks and cars right. The market is really moving toward SUVs, and we would like to get a larger allocation of SUVs to meet the demand of the marketplace, so we've asked Mercedes-Benz to see what they can do to increase production of SUVs.
Do you have an answer yet?
They're very interested in getting more SUVs as well. They've indicated we will get a few more SUVs [in 2016 compared with 2015]. How many is yet to be determined. We have the all-new GLC, which will add significant volume in that segment.
Does the brand need more production of the crossover models it already has or are there segments where it should introduce another nameplate?
Mercedes-Benz competes in all the SUV segments, so I don't see any big gaps that need to be filled. The dealers are more interested in getting more production of existing models.
Of the brand's crossover models, which are most in demand and in need of more production?
All of them. We can't keep enough trucks in inventory.
We've heard a lot from dealers about especially being in need of the GLE and GLC.
GLC has been really well-received by our customers. We're looking forward to getting the new GLS this year. I'm sure we will not build enough to satisfy customer demand.
So dealers welcomed the news Mercedes made in September about increasing its investment for utility vehicle production at its plant in Alabama?
We will see more trucks from the investment in the Alabama plant. I'm just not sure we'll get enough trucks to satisfy the demand. So we'll get more, but I just don't know if it will be enough. The SUV market is just very hot.
Mercedes has been very strong in China the last couple of years. But as growth in China slows, do you expect the U.S. will get more SUVs this year?
Mercedes-Benz has a worldwide footprint. They're always looking to move inventory around to markets that need them when other markets slow down. So we would hope, if that were to happen, that we'd get our share of those vehicles.
What do you aim to achieve as dealer board chairman in 2016?
The dealer board is focused on profitability for the dealers. We want to try to exploit opportunities to remove complexities from the business so we can just focus on taking care of customers and sales and service. We want to continue to drive our customer experience and be the leader in the industry.
Are you satisfied with profitability levels?
Although we've made progress, there's always more work to do, so we'd be working with Mercedes-Benz to simplify and eliminate complexity wherever possible and control our inventories. The industry has gotten so much more complex over the last five years that we want to look for ways to take very complex things and make them simple, which we expect will translate into lower costs.
Were there changes in margin structure from 2015 to 2016?
There were no significant changes to the margin structure. Some of the areas of focus changed, but the margin structure itself was largely the same.
You talked about streamlining the training requirements and costs. Would that be handled separately from the margin structure for the 2017 model year?
Yes. Every manufacturer expects to have well-trained people represent their brands. The dealers understand the need. They just want it delivered in a cost-effective manner. [The discussions] will be ongoing this whole year.
Some of the big dealership groups talked about shrinking margins and rising luxury stock in the fourth quarter. How did that turn out for the Mercedes-Benz dealer body as the year ended?
Mercedes-Benz had a very strong finish to the year. Inventories were in line with expectations. It looks to me like the luxury market is flattening out for 2016. All manufacturers are going to have to carefully monitor inventory levels to ensure they don't get out of balance, which will cause excessive incentive spending and higher floorplanning costs.