2006 Mercedes-Benz ML 500
2006 Mercedes-Benz ML 500. Photo: Grant Yoxon. Click image to enlarge

By Jeremy Cato

With three major product launches this year and more coming in 2006, including a reinvented S-Class, Mercedes-Benz Canada is looking ahead to a busy year and a sustained turnaround in its sales fortunes.

Mercedes-Benz Canada is counting on the new M-Class sport-utility vehicle (SUV) to give the company a major boost. Marketing director JoAnne Caza says the renovated M should top 3,000 units in annual sales, a big increase from the 2,500 sold last year in Canada.

Then coming in the fall are the R-Class crossover utility wagon and the smaller B-Class wagon. Mercedes does not offer vehicles in either segment in Canada, therefore the new models represent potential incremental gains. A seven-seat replacement for the G-Class wagon is also expected.

The B-Class is an interesting case. Mercedes-Benz USA, the U.S. sales arm of Mercedes, will not offer the B, saying the weakness of the U.S. dollar versus the euro makes selling the small wagon unprofitable. Canadian president Marcus Breitschwerdt, however, feels the B-Class is a perfect fit for a very competitive and unusually challenging Canadian luxury market.

“Canada is a blend of Europe and North America and it requires us to be innovative in technology and marketing,” he says. “The new products are there to change our business strategy – new products that have never been in Mercedes-Benz dealerships before.”

In expanding the company’s range of offerings, Breitschwerdt says Mercedes is conscious of offering products in similar price categories to BMW; however he insists that the two companies are very different. Where Mercedes is focused on advanced technology and sophisticated design, BMW is aggressive and sporty. Yet he bristles at the suggestion Mercedes is a conservative company.

Mercedes-Benz B-Class
Mercedes-Benz B-Class. Photo: Laurance Yap. Click image to enlarge

“We are not conservative. We have tradition, but we are not conservative,” he says, pointing to the innovative packaging and pricing for the B-Class, which is expected to sticker in the low-$30,000s. “I would like to lead new customers to the brand and I think the B-Class will do it.”

He is also aware of how difficult and competitive Canada is compared to most other developed countries. Canadians are more careful with their new vehicle purchases than Americans and they are less likely to buy a luxury vehicle. Indeed, the luxury segment of the Canadian market is less than four per cent, while in the U.S., luxury vehicles account for more than 10 per cent of all new car sales.

“Canada is the most cruel market,” he says, noting he’s been surprised by this since his arrival more than a year ago to head the Canadian unit.

On a larger scale, the Mercedes-Benz Car Group is struggling globally to regain traction after several years of embarrassing quality issues and slipping profits. Mercedes also is battling high production costs, a money-losing Smart car line-up and disappointing global sales for its Maybach super luxury sedan.

2006 Mercedes-Benz ML 500
2006 Mercedes-Benz ML 500. Photo: Grant Yoxon. Click image to enlarge

Fourth quarter results for 2004 illustrate the depth of the challenges ahead. Profits at the Mercedes division of DaimlerChrysler AG were a paltry US$27 million, compared to US$523 at DaimlerChrysler’s Chrysler Group.

Speaking at the recent Geneva auto show, Mercedes chief Eckhard Cordes said the world’s oldest and largest luxury carmaker has now turned the corner on quality after devoting substantial resources to this area.

A major culprit has been electronic gadgets which have befuddled owners and confounded the best efforts of engineers and designers to make them reliable and user-friendly. In this area Mercedes is not alone. BMW and other luxury automakers have seen their quality ratings slip because of issues with high-tech gizmos.

Mercedes has been hit the hardest, though. In J.D. Power and Associates’ 2004 Vehicle Dependability Study (VDS), a report based on consumer experiences after three years of ownership, Mercedes was ranked 28th in a tie with Mitsubishi. Mercedes was ranked number one in the inaugural 1990 VDS.

By simplifying a wide range of production processes, working more closely with suppliers, improving worker training and being careful with new electronic devices, quality has dramatically improved, say company officials.

Cordes also ruled out shutting down Smart, suggesting the small car unit which has cost the company some US$3 billion since 1998 would be at break-even by 2007.

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