MB's Anemic Sales because of Quality Issues
Who was it on this forum who said if MB makes poor quality cars..they are going to lose customers ..FAST !! And that too in its own "core" customer base - Germany . . . . I guess people don't want to make repeat mistakes....
All I can say is HAHAHAHAH!!!!!!
Guys if you own shares, now would be the time to sell.
Read Today's NEW YORK TIMES article on Daimler :
DaimlerChrysler reported a profit thanks to its Chrysler division, but the Mercedes-Benz unit had anemic sales.
By MARK LANDLER
Published: October 29, 2004
RANKFURT, Oct. 28 - Germany, with its high costs, reluctant consumers and restive auto workers, has become a major drag on the country's two largest carmakers, DaimlerChrysler and Volkswagen, which both reported mixed earnings on Thursday.
DaimlerChrysler had an operating profit of 1.3 billion euros ($1.65 billion) in the third quarter because of the resurgence of its Chrysler division. That is about a 7 percent increase over the period a year ago.
But the company's success in the United States was marred by sagging profit at Mercedes-Benz, which had anemic sales, particularly in Germany, and has been forced to embark on a costly campaign to improve its quality.
Profit at Volkswagen dropped 65 percent in the third quarter, to 76 million euros ($97 million), compared with the period a year ago. It was the seventh consecutive quarter of declining profit at Volkswagen, which has languished in the United States and China, as well as at home.
Still, Volkswagen consoled shareholders by sticking to its forecast of a full-year operating profit of 1.9 billion euros ($2.4 billion) before special charges - a goal it had already reduced once, last summer.
Shares of Volkswagen and DaimlerChrysler rose modestly in heavy trading here.
For both companies, Germany is proving to be a chronic headache. As they seek to cut labor costs, each has clashed with workers over wages and work rules. DaimlerChrysler settled its labor dispute last summer; Volkswagen is in tense negotiations with its union.
Though they are global companies, both depend on Germany, which has yet to regain its economic footing. Over all, DaimlerChrysler's sales rose 3 percent in the third quarter, compared with last year. But sales in the European Union fell 2 percent, and in Germany 7 percent.
"Demand continued to be weak in Western Europe, and more especially in Germany," Manfred Gentz, the chief financial officer of DaimlerChrysler, said in a call with analysts.
Operating profit at Mercedes, once the company's money machine, fell 62 percent, to 304 million euros ($386 million) in the third quarter. Some of that decline was related to the rising euro and the weaker dollar, which makes Mercedes cars more expensive in the United States.
But Mercedes was also hurt by what Mr. Gentz called a "strong deterioration" in its Smart group, which makes small vehicles for Europe's narrow streets and has designs on the American market.
Analysts say the most disturbing long-term issue for Mercedes is its quality. With complaints about glitches multiplying, Mercedes has undertaken a campaign to repair the problems. It has also delayed the introduction of some models so they are not sold with similar problems.
"Quality costs are significant, they are very significant," Mr. Gentz said. But he added, "I think we can really say and prove that vehicles that left our factories in the last 12 months have had almost no problems."
Standard & Poor's, which reaffirmed its rating on DaimlerChrysler's debt, said in a note to clients that it was concerned by the negative trends at Mercedes, particularly the quality issue. But it expressed confidence that the division would "return to its previous position of strength."
DaimlerChrysler named Eckhard Cordes, the former head of its commercial vehicle unit, to run Mercedes. Mr. Cordes turned around the struggling commercial business by closing plants and cutting costs. The company hopes he will bring the same magic to its flagship division.
The problems at Mercedes have put Chrysler in the unaccustomed position of star division at DaimlerChrysler. After suffering losses and layoffs, Chrysler's operating profit rose 48 percent, to $269 million, in the third quarter, despite the continued reliance on sales incentives in the American market.
Chrysler's new models, particularly the 300 sedan and the Dodge Magnum, have been popular.
Volkswagen found it harder to point to a bright spot. Its once-dominant market share in China has been eroded, mainly by General Motors, and it is on track to lose 1 billion euros in North America in 2004. In Germany, Volkswagen's new Golf has been a disappointment.
The chief executive, Bernd Pischetsrieder, plans to trim 4 billion euros ($5.1 billion) in costs by 2005. Volkswagen's workers are threatening to strike over its demand that they accept a wage freeze and reductions in benefits. The company aims to lower its labor costs 30 percent by 2011. Volkswagen's union demanded a 4 percent wage increase, which it trimmed to 2 percent.
A VW spokesman, Dirk Grosse-Leege, said: "If you want to reduce your labor costs, you cannot start with a wage hike. We're giving them the opportunity to have the same amount of money in their pockets."
Volkswagen and the union, IG Metall, held more talks on Thursday. But officials from IG Metall said there had been no progress and vowed to start holding warning strikes at Volkswagen's flagship factory in Wolfsburg and other German plants.
While DaimlerChrysler is enjoying labor peace, it has other personnel-related problems. The company disclosed it was being investigated by the Securities and Exchange Commission over its compliance with the Foreign Corrupt Practices Act, which forbids the paying of bribes.
The investigation stems from a whistle-blower complaint filed with the Labor Department by a former employee, David Bazzetta. Mr. Bazzetta, who worked in Chrysler's finance department, has filed a lawsuit in federal court, in which he accuses Chrysler of maintaining a secret bank account in South America to bribe foreign officials.
DaimlerChrysler said in a statement that there was no merit to Mr. Bazzetta's lawsuit. It said that he had been dismissed by Chrysler, and was "not happy to have left the company."