Speeks, 61, spoke last month with Staff Reporter Urvaksh Karkaria about the company's response to the coronavirus and his outlook for 2020. Here are edited excerpts.
Q: How are you managing operations during this period of uncertainty?
A: It's been an opportunity for me to get to know people better, more intensely over the last two months. The level of communication, the frequency — because we are working remotely — has certainly increased.
It's been stressful. It is really a great learning experience. Through it, I have acquired a far greater level of confidence in what we are able to do, the speed with which we are able to do things, the clarity with which we can focus.
I have not been able to see as much of the United States as I would have liked to over the past couple of months. Honestly, I don't miss the travel. I don't miss the whole frenetic lifestyle traveling from one airport to the other.
What have you learned most from the pandemic?
Because of the effect the crisis is having on us from a bottom-line perspective, a lot of what we do is being subject to review and also the manner in which we're doing it. Are we doing things that are core to the business? Are we doing things that really add value either to our customers, or to our dealers? Did we engage previously on things which are more peripheral — nice to have, interesting to do, but not really adding value?
There are a lot of learnings as to how the business is conducted on the retail front, where you see digitally supported sales have come into focus. The resistance to these new models from dealers has been diminished. Necessity has forced us to take steps that we might have been a little more slow in doing early on.
What's the outlook on customer demand for the rest of the year?
The first 10 weeks of the year were great. We were on track for the first quarter to be at a record level in terms of volume. That ground to an immediate halt when the states started to lock down.
After that we took a hit. We had to set some sort of baseline where we would be in Q1, Q2 and for the year. So far, those doomsday-scenario projections are being exceeded. Obviously, we are not back anywhere near where we, under normal circumstances, expected to be, but things are certainly better than we had thought they might be.
I see demand improving from a base that is higher than we thought it would be when we originally looked at the effect of the crisis on the second quarter.
What's the plan to stoke demand and boost dealer profitability?
There will be a call to do as much as we can in terms of volume. But our main focus at the moment is on profitability.
Volume is important to our dealers in terms of creating demand for service and for earning potential. But at the moment, we are more focused on what is financially reasonable in a market to strive for.
There was an onus in the past on producing volume and beating certain competitors and being No. 1. I think those things are important, but they have less importance now at the moment and for the immediate future than producing volume for volume's sake.
How are you positioned, product-wise?
We are fortunate that we have, in a market which is very much SUV, a product lineup that is new and a sales mix that is 63 percent SUV. We think we are quite well positioned from a product point of view to provide customers what they want.
On the retail front, the crisis has brought things into sharper focus. It is clear we have to reduce the cost of the franchise and the cost of doing business. From a cost of retail, how do we transition to a lighter footprint in terms of the physical network? Can we look for efficiencies in back-office functions for dealers, many of whom are multibrand? Are we going to focus more on customer experience and experiential marketing?
How have dealers responded to the crisis?
I am impressed by the innovativeness, creativity, courage and sheer grit of the dealer network, despite very difficult circumstances in some cases.
We have tried to provide an environment where they have had some firm ground under their feet. The dealers have really picked up that ball and run with it.
How do you see the crisis affecting Daimler globally?
If you look at Europe, the United States, South America and the Middle East, all of these areas are being hit. That has a palpable effect on Daimler. There will be opportunities to let go of certain activities that we saw as being critical to our success in the past, in terms of how we launch vehicles. We are able to digitally launch a vehicle and we'll probably seek to do that in the future rather than the whole razzmatazz fireworks events that we've had in the past.
In terms of product development, Daimler is very much focused on its commitments and obligations with regard to battery electric vehicles, hybrid engine development and the transition to move away from a pure internal-combustion engine base to a hybrid and electric base. We will have to see, as we go forward, what that means for the United States in how we implement that policy and when.
The game has changed. Therefore we look at our product portfolio bearing in mind the complexities around it. Do we need all the products that we currently have? We also have to play our part in cutting our costs to meet our means. That is something we are engaged in.
What is Mercedes-Benz USA doing to align costs with the reduced volumes after the pandemic?
We are looking at the product portfolio and option packages. We'll look at marketing efforts and focus more on the brand experience.
There will be some work force reduction within MBUSA, which we have already enacted to a large degree. We are going to focus on those things that we're good at, and we're going to allow the dealers to do what they are good at.
Mercedes has instituted a remote-work policy for headquarters office employees through the end of the year. Why?
Working remotely was the exception — for the foreseeable future, it will become the norm. It gives us an opportunity to try something different. The effectiveness, efficiency and speed with which the company has been able to conduct its business has not been diminished by that fact. It gives people an opportunity to have work blend in better with their life. We are going to keep the plan until the end of the year and see how that goes.
How do you see the pandemic accelerating the shift toward digital retail?
Digital retail and a seamless digital experience was a centerpiece of nearly every initiative prior to the pandemic. However, the pandemic has accelerated the speed and focus of these efforts.
There is no question digital retail is a key driver of volume during the past few months. Our dealers have come up with some great enhancements quickly, including contactless test drives, at-home service and updates on their sanitization efforts.
We're working in partnership with our dealers on other measures to enhance the overall experience — not just retail — especially on service and virtual diagnostic tools.
What's the plan to get consumers returning to Mercedes stores amidst the pandemic?
You'll see our marketing begin to ramp up this summer with a renewed focus on overarching brand communication vs. model specific. We have a few surprises planned, so stay tuned.
How will the crisis affect Mercedes' electrification plans?
Before the pandemic, Daimler made the decision to reschedule the U.S. launch of the EQC until 2021, and that remains the current plan. Beyond that, I can only say that discussions are ongoing about implications to our future model offerings here in the U.S., which would include electric and internal-combustion variants in parallel.
What are your immediate areas of focus, beyond the pandemic?
A concerted focus on the costs associated with our franchise, and the associated costs of doing business. We are looking at every opportunity within our product portfolio
Adapting and reimagining the overall brand experience, while maintaining a critical focus on profitable and sustainable growth over the long term — in essence, continually asking ourselves: "What to keep, what to cut and what to amplify?"
What would you like the federal government to do to help stimulate vehicle demand in the second half of the year?
We're not in a position to comment on any proposed programs. What I can relay is that we are more encouraged by the progress over the past few weeks — as far as our part of the market is concerned — that things are picking up in certain pockets of the country. But this certainly varies by region and municipality.
There is a long way to go. But we are starting to see things progressing in the right direction at a steadier pace than perhaps we envisaged a few months ago.