Last post on Jan 28, 2013 at 6:55 PM
You are in the Sedans
What is this discussion about?
Audi A8, BMW 7 Series, Jaguar XJ-Series, Lexus LS 460, Mercedes-Benz S-Class, Volkswagen Phaeton, Maserati Quattroporte, Mercedes-Benz CL-Class, Sedan
Let's try to define this forum as being limited to luxury performance vehicles where the mainstream version in a typical configuration has an MSRP of at least $60k.
A luxury vehicle with a base price of $59k qualifies because it would typically be bought with some additional equipment, bringing the MSRP over $60k.
Vehicles like the E, 5, A6, M, or GS, even if available in certain versions over $60k, don't qualify because they are cars from companies that have higher end cars in their lineups.
Apr 20, 2004 (2:09 am)
"For MB, US sales position have changed from #1 to almost #4."
They managed to get to number 1 for one year, what in 1999 or 1998??? They did this on the back of the ML SUV which back then was a big deal for Mercedes-Benz because they never sold one here before. One year at #1 because of SUV and they are supposed to maintain that momemtum and compete with a company that makes fifty percent of their sales on SUVs and the other 50 percent with much cheaper cars, mainly a 35K fwd model. Right.
Dont' get me wrong here. I congratulate Lexus for their market success in the SUV area, the Germans are still clearly behind here. Notice how I don't even dare suggest that this is Lexus' fault.
But how come if MB has increased sales each year since 1993 (from 60K to over 200K) in this country, with higher prices than everyone else, a 4.7 percent drop in 2004 is seen as the beginning of the end? If anything with such a high priced lineup MB's market share grew in proportion to what could be reasonably expected of a brand with much higher priced cars, in other words they're going to always get a smaller share of the sales pie. I wonder how many over 50K cars (still the bulk of their models) Mercedes has to sell compared to Lexus tearing up the under 50K segment with the ES and RX for sales to be a wash. What am I thinking money is no object and sales are sales everyone can afford to buy-upwards.
I wonder why Ferrari doesn't outsell Porsche or why Maybach doesn't outsell Bentley? Price certainly couldn't have anything to do with this.
#4755 of 24723 MB Prices High because
Apr 20, 2004 (4:10 am)
If MB built better cars and built cars better, they could sell them for less money and be more profitable. It's the way smart companies in competitive marketplaces win.
MB prices are higher than Lexus (and Infiniti and others) because their cars cost more to produce, sell and service. Their production processes aren't as efficient as Toyota's nor their ability to manage their supply chain as good.
They have a broad product line with low volumes in many of the lines. The engineering costs are higher, the production volumes lower, the learning curves slow to deliver improvements. This results in the higher defect levels that impact production and the resulting poorer dependability, reliability, serviceability and availability impact their costs and customers.
* Higher defects during production raise direct costs
* Higher defects during warranty raise costs
* Higher defects requires more marketing money to prop up the decade old superiority image, now no longer true
Mercedes doesn't sell their cars at today's prices because they want to, they do it because they have to. Their entire marketing campaign is designed to make you think you are getting something you aren't. "Like no other" is right, better said as "No two are the same".
Their profitability is lower ( and the Chrysler-Jeep drain no help ). Their R&D is tighter and narrower and this makes them more dependent on suppliers for new technology, which is widely available to others. The technical edge is gone and often bleeding edge, not leading edge.
I don't think that MB is 'dying' but they are in serious trouble for the first time here in the U.S.
They haven't adapted to the competition yet and it shows.
Apr 20, 2004 (7:15 am)
I'll just give you my view of what OAC and others, including myself are saying.
I think any hint of a decline of the German marquees is exaggerated into the companies are going out of business. I haven't read where anyone has said that or even hinted at it. But in the financial community you are always looking for the tip of the iceberg as an indicator of things to come. I think all that people see here are a lot of tips of the icebergs. The business model built in the past may not be so sustainable going forward - at least not at the success level of the past. Look at all the clues out there. The bulletproof cars built are gone as is the mystique that both brands build bullet proof cars. The improvement in quality is slowest among all car brands. The resale values are falling faster (in percentage terms) than any lux brand out there. That means the upfront prices as new cars can't hold much longer and there are plenty of indications of that. Heck - I just saw a $77k S430 lease deal advertised at only $100 a month more than my $65k LS430 and it wasn't specific to any individual car. I saw $77k BMW deals advertised at the same rate as my $65k LS430. Lux brand dealers don't have come-ons - at least not in my experience. Now throw in a fierce competitor like Toyota who is well capitalized, very profitable (record earnings just made) with a rare and very strong Balance Sheet for a manufacturer. They build cars very efficiently and may have a big market lead in the next gen car engines (for the US market at least). Add in a rapidly recovering Nissan (in the hands of a European which is ironic)and a Honda that has always been strong and you see alot of competitive warning signs out there. On top of that throw in a Chrysler that has to be rebuilt and will utilize a lot of resources and may uiltimately drag down the famous lux brand name. I just read stories on the Hemi (a car I like by the way except the rear from the side has an old Eldorado look to me) and couldn't miss the cross jabs and some comparisons to the E-class let alone the instances of part sharing. Remember Lexus was built on top of Toyota whereas Chrysler is being rebuilt under MB. Big difference in perception to the market. Finally you have the strength of the Euro to contend with, the first signs of falling sales (we'll see if it's real or a false alarm in the coming months) and the media coverage of CR's car quality - whether you accept that or not - it's there.
Anyway my point of all this is that there is not one tip of the iceberg out there but many. This has nothing to do with enthusiastic cars bult today and everything to do with the business of selling them and continuing their domination. Will the business stay healthy enough and capitalized strongly enough to maintain that edge or not. We're not talking about the next 2-3 years here but the 5-10 years after that period. Personally I don't think so and I think BMW is stretching themselves too far these days. But that's just my business opinion. Sometimes tip of the icebergs are overstated and sometimes they are not. As I said before it will be interesting to see this play out. But the long and short of all this is that even when you hit the iceberg you don't have to sink. Look at IBM.
By the weay - I never made it to the auto show. Buiness issues on Friday (the day I really wanted to go), a more complex tax return than I expected and family functions took away all opportunitities. I wanted to see that futuristic Audi sports car and also drive the Jeep Grand Cherokee on the indoor hill but I'm afraid you can't always get what you want.
Apr 20, 2004 (8:31 am)
I am sorry I just couldn't get through your very long messages, But I did see my name mentioned so rather then respond directly to whatever you said I would like to make what I believe is a constructive observation.
Back in the days when Mercedes was the unchallenged king and body styles remained the same for years and frankly Mercedes cared less about pretty and more about functional.
Back in those days Mercedes advertising centered on safety and safety innovations....They were the leader and probably still are..But now the marketing objective has changed to the beauty of the sheet metal and the cars prestege (which once was understood and didn't need to be spoken by the company)
Back in those days when I couldn't afford a Mercedes I always wanted one...
P.S. Merc. did I read somewhere, that you are a tech for mercedes is that correct?(Just curious)
#4758 of 24723 Lexus Loyalty/Conquest
Apr 20, 2004 (11:27 am)
There was a short article in Automotive News about Lexus. They are experiencing the rare combination of having both buyer conquest and loyalty rates rise at the same time. And both of these have been rising for the past three years.
Loyalty (Lexus vehicles traded in on other new Lexus vehicles):
Note: The article confused me a bit because it also put the loyalty rate at 54%.
Conquest (Buyers who came to Lexus from another brand):
2003: nearly 70%
Every luxury brand except Saab is seeing a greater percentage of its customers depart to Lexus versus three years ago.
Apr 20, 2004 (9:59 pm)
"MB prices are higher than Lexus (and Infiniti and others) because their cars cost more to produce, sell and service. Their production processes aren't as efficient as Toyota's nor their ability to manage their supply chain as good. "
I agree with all of this, but that wasn't what we were talking about here. My point for the last couple of days has been that a few on this board are hyping small sales losses as the end of BMW and Mercedes-Benz or like they are in some type of galactic trouble. Yet in the same post they'll come up with all kinds of excuses as to why certain other brands (Lexus) have similar problems with certain models, but those logical reasons couldn't possibly apply to Mercedes-Benz or BMW models of the same age and/or going through a model change over. One thing of interest here, how is MB managing their "supply" chain incorrectly? They do it the same way any other luxury car maker does. In what way is Mercedes different? Please explain this.
Everyone knows that Toyota is the production efficiency king. Everyone knows that it costs more to produce cars in Germany for the reasons you mentioned, and some others you don't. Even when Mercedes topped these reliability surveys in the early nineties they still cost way more than the competition, so all of the cost is not sheer reliability and defects.
"Their entire marketing campaign is designed to make you think you are getting something
Really? So all of the innovations that Mercedes has and their beyond government safety standards, and in many cases much more variety doesn't account for anything. Right. Lexus' marketing slant is that of a knock-off Mercedes with their LS and a knock-off BMW with their IS and probably the upcoming GS. Just because you don't see anything more in a Mercedes doesn't mean it isn't there.
"I don't think that MB is 'dying' but they are in serious trouble for the first time here in the U.S."
Really? I would call serious trouble back in the early nineties when Lexus started gaining ground and Mercedes sold less than 60K cars a year for a few years. That is serious trouble. Now if you're basing this assessment on the reliability situation then your statement has more merit. If your statement is based on the sales drop of the first three months, then it is nonsense like the other posts of similar ilk.
I agree they do have a reliability problem and the perception of the problem is getting worse. What I disagree with is the buzzards-are-circling mentality on this board in particular.
"Their profitability is lower ( and the Chrysler-Jeep drain no help ). Their R&D is tighter and narrower and this makes them more dependent on suppliers for new technology, which is widely available to others. The technical edge is gone and often bleeding edge, not leading edge."
I agree the Chrysler arm is a drain, but they may be starting to turn that around too. Maybe. They have a ton of new product on the way. However, tell me if MB's technology is so supplier based (like a lot of Toyota's isn't) then why is that Mercedes manages to always beat Toyota to the punch (specifically Lexus) to the market with it? I took the LS430 until 2004 to acquire certain features the S-Class back in 2001. This fact doesn't jive with your statement.
Well not to get too deep into your post, but your posts for the most part have always had a logical/factual base, others don't. I always pay very close attention to your business minded posts and really can't take issue with anything you've just said. My problem was (in part) with people talking about sales losses for certain models (5-Series) when in fact it wasn't even true.
You and footie shouldn't think for a minute that I don't see a problem with Mercedes and to a lesser extant BMW. The reliability issue will only get worse before it gets better. Why? Because most of these surveys look back 3 years and for 2004 they'll be looking at 2001 models and for 2005<>2002 and 2006<>2003 so it is going to take some time for MB, BMW, Audi, Jaguar, Land Rover, and whoever else is deemed unreliable, to pull themselves up.
I'll be the first one to order the closing of the water tight doors and the manning of the lifeboats.