Date registered: Aug 2002
Vehicle: '85 2.3-16 '99 C280 '11 GLK350
Location: Scottsdale, Arizona, USA
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RE: Mercedes Seeks to Save a Billion Euros
The plan, dubbed CORE, is designed to return Mercedes to a 7 per cent return on sales after quality problems, the strong euro and slow sales of Smart small cars pushed its profits down 97 per cent in the last quarter of 2004.
Cordes said he had set a Ã¢â‚¬Å“4CÃ¢â‚¬? challenge Cost, Complexity, Culture and what he called Ã¢â‚¬Å“CualityÃ¢â‚¬? designed to shake up Mercedes.
The company has been criticised for outdated production methods, too many variants in its product line-up and a culture that pays scant attention to cost.
More recently its status as GermanyÃ¢â‚¬â„¢s luxury icon has been endangered by a sharp rise in breakdowns, which analysts estimate cost the company 500 million Euros last year and hurt its image.
Cordes gave few details of the cost-saving plan or of how revenues would be boosted, but said there were no longer quality problems with new vehicles being assembled.
He showed a chart that attributed most of the problems to the E-Class, saying that warranty costs, excluding the executive saloon, had fallen by 10 per cent since 2002. Including the E-Class warranty costs rose, but he did not say by how much.
Only on the Smart division which is estimated to be losing as much as 5,000 euros on each of the cars it sells did Cordes give much detail.
Ã¢â‚¬Å“Smart is a disaster.Ã¢â‚¬? He said it was Ã¢â‚¬Å“possibleÃ¢â‚¬? that Smart would break even in 2007, a year later than the official target.
Ulrich Walker, Smart chief executive, told the Financial Times in January that he had a Ã¢â‚¬Å“personal targetÃ¢â‚¬? that the company should make a profit in three to four years.
However, Cordes again ruled out closing Smart. Goldman Sachs analysts said in a note that closing Smart would cost 1 billion Euros but Ã¢â‚¬Å“is clearly the logical course of action for shareholdersÃ¢â‚¬?.
Instead, Smart will continue development on a replacement for its two-seater, which should go on sale in 2007. The new car will be compatible with US safety standards, allowing a launch in the US to be considered some time after 2007.
The brand has been launched in Canada, but US sales, which were supposed to be announced this January and spearheaded by a new small SUV built in Brazil, did not go ahead.
The SUV has now been put on ice and is expected to be formally scrapped when a new business plan for Smart is finished in April.