Will Merc's products and reputation rise again?

http://driving.timesonline.co.uk/article/0,,12389-1521256,00.html

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           Mercedes, the marque that lost its lustre, woos disaffected
customers
           Emma Smith

           Sales have slumped, profits nose-dived and even German taxi
drivers are switching allegiance. The trade press is full of grim news about
Mercedes as it struggles to regain its once unrivalled reputation for
reliable, luxurious motoring.
           Last week the company hit a new pothole when the E-class was
ranked by one magazine as the most unreliable car on American roads. In
Britain last month it was forced to recall more than 6,000 CLK 240 sports
cars because of an assembly error. The fault, which could cause the side
airbags to activate on the opposite side of the car from a collision,
affects all right-hand-drive cars of this model produced between November
2002 and March 2004.

           It is a situation once unthinkable at the company until recently
upheld as a benchmark for engineering excellence and German durability. When
the JD Power survey of car customer satisfaction began in America in 1985,
Mercedes was in first place. Last year in Britain it fell to 21st out of 33
marques.

           Matters were not helped when J?rgen Schrempp, the chief
executive of DaimlerChrysler, owner of Mercedes since the merger of Chrysler
and Daimler-Benz in 1998, admitted quality had slipped.

           The confession didn't come as news to many already disillusioned
Mercedes owners. Timothy Yim, 46, a management consultant from Chelsea
Harbour, London, is threatening to desert the brand. He has owned Mercedes
cars for 20 years, a motoring tradition in his family. His grandfather has
one, his father two and his sister, aunts, uncles and cousins own several
more.

           After a string of bad experiences, Yim is considering changing
his C280 for a BMW. "I don't think much of Mercedes cars now and I think
even less of their aftersales," says Yim. "This is a company which, for us,
stood for something. One of the oldest manufacturers with a reputation for
quality. It's sad that it has gone downhill. Virtually every owner I've
spoken to has one problem or another."

           Yim has stopped taking his car to official Mercedes dealers for
repairs and servicing. The last time he took the car to the franchised
dealer in Chelsea, he says it forgot to replace the radiator cap, a mistake
only rectified four months and 1,165 miles later when a warning light
appeared on the dashboard. During the same service he says Mercedes
misplaced the key to his wheel lock and forgot to stamp the service book.

           "If they can miss something as simple as a radiator cap, I hate
to think what else they might have overlooked," says Yim. "I don't mind
paying Mercedes prices but I expect a superior service."

           James Lloyd, another long-time devotee of the brand, bought his
first new Merc, a 180 C-class coup?, in 2002. His enthusiasm faded as the
car returned to the garage repeatedly and Mercedes failed to fix a recurring
fault that caused the oil warning light to flash.

           "It must have been back to the dealer more than 10 times," says
Lloyd, 46, a lorry driver from Burnham-on-Sea, Somerset. "Each time the
fault returned." In August 2003 Mercedes finally relented and gave Lloyd a
replacement car at a nominal cost of ?2,000.

           Even German taxi drivers, once the marque's most loyal
supporters and sticklers for reliability, are said to be deserting. The taxi
rank at Stuttgart airport, a few miles from Mercedes' headquarters - once a
solid row of gleaming Mercs - is increasingly likely to be headed by a VW,
Opel or even, once unthinkable for patriotic German cabbies, a Mazda,
according to some reports.

           Mercedes' share of new taxi sales has fallen heavily in just
five years, down from 70% to 50% since 2000, according to the German Taxi
and Car Hire Association.

           Industry insiders blame the rapid introduction of high-tech
gadgetry and complex electronics that are prone to malfunction. Morale has
not been helped by massive losses at the Mercedes-run Smart small car
division, thought to be in excess of ?250m last year. The company has
introduced a stringent cost-cutting programme, dubbed Core, aimed as
boosting Mercedes' earnings by at least ?2 billion by 2007 and restoring
profit margins to 7% - they sank to just 0.16% in the final quarter of 2004.

           Eckhard Cordes, head of Mercedes cars, has called the slip in
profits unacceptable but seems aware of the reason behind the fall. "I
assume personal responsibility for bringing Mercedes' quality again to the
highest level," he says.

           There are signs, though, that Mercedes may be turning the corner
in terms of restoring customer confidence. Rob Halloway, spokesman for
Mercedes in the UK, says the company is putting new effort into quality
control and service. "We look very seriously at what our customers tell us,"
he says.

           "The company has acknowledged that there have been reliability
issues but we are sorting out the problem. We are investing a lot of money
in product quality. The new cars are starting to speak for themselves. We
want to make sure all our customers are happy."