Mercedes lineup, cost issues await next CEO

ATLANTA — Dimitris Psillakis has three months before he takes over the top job at Mercedes-Benz USA. That may give the incoming CEO time to consider new solutions to the rising challenges the luxury automaker is facing.

Psillakis, currently Mercedes-Benz's Canadian boss, will oversee both the U.S. and Canada markets starting Jan. 1.

The 53-year-old Daimler veteran and Greek native replaces Nicholas Speeks, 61, who abruptly took a leave of absence in August and never returned. Daimler said last week that Speeks left the company to pursue other opportunities.

In his new role, Psillakis (pronounced zill-LACK-iss) must steer Mercedes through a post-pandemic downturn that's still buffeting the North American industry. J.D. Power forecasts 2020 U.S. retail auto sales of 11.3 million to 12.5 million — a plunge of 1 million to 2 million vehicles from Power's pre-virus forecast of 13.4 million.

But even before COVID-19 concerns locked down much of the U.S. retail network, Mercedes was contending with a softening market for luxury vehicles and growing competition from BMW.

"The company is being pushed to limits you would have not normally pushed it," Speeks said of Mercedes in June. "Some difficult decisions have had to be taken, not only with us but also within our dealer body."

Mercedes delivered 59,461 vehicles, excluding commercial vans, in the second quarter, down 22 percent from a year earlier.

Psillakis must also address product lineup complexity and dealer profitability — two issues likely to get more complicated as Mercedes marches toward electrification.

Mercedes' bloated U.S. portfolio has nearly doubled to 15 nameplates since 2000.

Including engine variants and body styles, the lineup in the U.S. has ballooned to more than 100 versions.

Speeks had been tackling the problem.

In June, he told dealers that the company plans to jettison seven car models from the U.S. market. The portfolio expansion makes it harder for consumers to differentiate among models and adds complexity and cost for dealers.

Reducing cost and complexity in the retail network would help alleviate another dealer concern.

"The No.1 focus for dealers has been profitability," said Jeff Aiosa, owner of Mercedes-Benz of New London in Connecticut, who also is the National Automobile Dealers Association brand representative. "Margin structure and cost of doing business is an ongoing conversation."

The pressure on dealer and factory bottom lines likely will escalate as Mercedes rolls out a fleet of EQ-branded electric vehicles in the U.S.

"The pricing structure on EQ vehicles is going to be a pivotal discussion," Aiosa said. "The margins for the manufacturer are lower on EVs than with ICE technology. How and if that effects dealer margin is unknown."

Psillakis has extensive international market experience to draw from as he takes on his new responsibility.

He joined Daimler AG in 1992 as a management trainee with its Greek subsidiary Mercedes-Benz Hellas.

In 2009, Psillakis moved to Mercedes-Benz do Brasil as managing director for passenger cars in South America and Vans Sales Brazil.

Six years later, Psillakis was promoted to lead Mercedes' South Korea market. As CEO of Mercedes-Benz Korea, Psillakis grew the business into Mercedes' fifth-largest market.