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from the Wall St. Journal:



DaimlerChrysler Begins Big Recall

Move Shows Mercedes-Benz
Still Beset by Quality Woes;
Profit Timetable at Risk?
By STEPHEN POWER
Staff Reporter of THE WALL STREET JOURNAL
March 31, 2005 4:25 p.m.

FRANKFURT -- DaimlerChrysler AG said it was recalling 1.3 million Mercedes-Benz cars world-wide, the largest number of vehicles ever called back by the luxury brand in a single step and the latest sign of quality problems caused by malfunctioning electronics systems.

The announcement -- which covers several hundred thousand cars in the U.S. and includes Mercedes cars made as recently as last month -- is significant because it undercuts recent assurances by DaimlerChrysler executives that the luxury division's quality problems are largely under control and confined to cars made one or two years ago. It also threw into question the company's timetable for restoring Mercedes's profits, which normally account for as much as half of DaimlerChrysler's operating profit but fell 47% last year as a result of quality problems at the unit, a weak dollar, and high costs at the Mercedes division's small-car unit, Smart.

The recall is also a fresh headache for Robert Bosch GmbH, one of Mercedes's oldest and most important suppliers. The Stuttgart, Germany, company, which supplied a faulty diesel pump that briefly led Mercedes to suspend production at some of its factories earlier this year, provided many of the components that were cited in Thursday's announcement, such as battery-control units and voltage regulators. Robert Bosch said Thursday it was cooperating with DaimlerChrysler on supplying new parts and that discussions about sharing the cost of the recall were premature.

In announcing the recall, DaimlerChrysler, also based in Stuttgart, didn't provide many details about the kinds of problems that have emerged in the affected cars. A spokesman in the U.S., however, said the company had no evidence any of the glitches had led to accidents or injuries in that market.

The affected cars include certain Mercedes models with six- and eight-cylinder gas engines built between June 2001 and November 2004 that will need to have their voltage regulators checked and in some cases replaced, the company said. The recall also covers certain E-class and CLS-class models, built from January 2002 until January 2005, that need new battery-control software. Finally, the company said the braking systems on some E-, SL- and CLS-class models made between June 2001 and March 2005 would need to be updated.

"These are not safety issues, but they are very aggravating for customers," said Geoff Day, a spokesman for Mercedes in the U.S. As examples, Mr. Day cited power surges and power failures "which lead to flat batteries" or can cause the cars' electronic navigation systems to malfunction.

As for the brake systems, a spokesman for DaimlerChrysler in Stuttgart said the company has received reports of "a few cases in which customers claimed that damage to property occurred" after the systems failed to work as expected.

The size of the recall caught many longtime Mercedes watchers by surprise. As recently as the company's Feb. 10 annual news conference, the division's top executive, Eckhard Cordes, said Mercedes cars coming out of the company's factories were the best in the company's history. "Everything is ... in good order and we've gotten a handle on it," Mr. Cordes said in a conference call with analysts that day.

"The size is enormous," said Juergen Pieper, an analyst with B. Metzler seel Sohn & Co. in Frankfurt. "It's one of the biggest call-back programs I've heard of."

Mr. Pieper said that, while Mercedes has "probably seen the trough" in its earnings -- which were down 97% in the last three months of 2004, to €20 million (about $25.9 million) -- the variety of electronics problems cited in Thursday's announcement was unusual. He added, "It shows that Mercedes still cannot offer 100% quality."
 

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Wow, that's BIG!!! I hope this is the start of a good thing for DMC -admitting

fault, taking charge and moving on. Yeah right, what planet am I from!!!
 
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