Daimler In Trouble – And It Will Get Worse

Bertel Schmitt
by Bertel Schmitt
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daimler in trouble and it will get worse

A few months ago, we discussed what Nissan/Renault’s Carlos Ghosn calls a “structural decline” of Europe: Missing car buyers, brought on by a sudden decline of births around 1970. A population peak that now sits smack in the middle of the prime new car buying age, which in most of Europe is between 40 and 60 years, will retire in a few years, throwing Europe’s car industry in turmoil. Daimler, which has some of the oldest buyers, is beginning to feel the pain.

Daimler told Reuters and its shareholders that it might cut its 2013 profit expectations this month, which many analysts had not bought in the first place.

“Not much tailwind is anticipated from the markets in the coming months. For Europe in particular, there are no signs of a trend reversal,” said Daimler CEO Dieter Zetsche. Eroding sales in Europe and problems in China, paired with institutional arrogance, made Daimler fall far behind rivals Audi and BMW.

At the cheap end of the spectrum, Fiat CEO Sergio Marchionne said the company’s losses in Europe could be worse than expected this year.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Fintail jim Fintail jim on Apr 10, 2013

    Getting back to the topic of what ails Daimler in general and Mercedes-Benz in particular: I've owned 7 different Mercedes-Benz. One was a 1995 E320 Coupe. Presently my wife drives a 2010 GLK350 and the other day I was given a 2012 C250 as a service loaner while it was in for routine maintenance. Enough said. I too will retire in a few years and have considered that the maintenace costs of a Mercedes-Benz may be a deciding factor in my choosing another make. Two days in the C250 cinched that decision unless something changes drastically.

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    • Fintail jim Fintail jim on Apr 10, 2013

      @Pete Zaitcev Fair enough, Pete. If you have had the oppotunity to spend time in the W124 Benz (the 1995 E320) and the newer car you will notice the quality of the materials and their fit (and especially finish) is literally palpable. In some cases it is the little things. My 2007 C-class makes a little chirping sound when the alarm is armed. Starting with the replacement for that particular model the audible signal was a toot of the car's horn (just like in my daughter's $12,000 Ford Focus). In other ways it is more glaring. Even with 18 years' of technological advancement to erase the difference the supercharged 4 cylinder doesn't approach the in-line 6 of the E320 in smoothness. Though the newer engines (both the V6 in my 2007 C-class and the 4 of the 2012 model) have torque ratings similar to the in-line 6 it seemed that older engine wanted to just keep on accelerating. Maybe it was the magic of the variable cam timing (M104 engine). I will admit the 7-speed automatics in the newer cars work well for me as I have a balanced mix of in-town and highway driving. I live in Texas and frequently travel around most of the central and eastern parts of the state. Even the newer Mercedes-Benz, including my wife's GLK350 are nice on the open road - definitely better than my mother-in-law's CRV (but that is a great car for her and her driving habits). My point was alluded to by another poster; IMO Honda, Toyota, and even Hyundai have closed the gap with premium German brands like Mercedes-Benz, BMW, and Audi in terms of quality, reliability, and performance and Mercedes-Benz (the marque with which I am most familiar) has regressed by aiming for volume over unit profit. Yeah, I know that's hard to believe given what even the new C-coupe lists for. When I bought the '95 Benz I told the salesman that his dealership (and the Mercedes-Benz brand) had no way to compete against the likes of Lexus except in customer service and to maintain their edge in engineering their vehicles. Once again, other "lesser" brands have advanced and Mercedes-Benz has slipped over the last 15-20 years. For some, cars with the three-pointed star will always be aspirational - and only aspirtational but for many something that fails to meet expectations will be relegated to the junk yard of history. One final anecdote to my point: The 1995 E320 Coupe listed for around $63,500. It's replacement, the first CLK coupe listed for around $40,500. Some of that $23,000 difference was made up, I'm sure, in production efficiency but what other factors figured in? All together now can we say, "Value engineering." Several years ago a former Mercedes-Benz salesman said to me,"At one time these cars (Mercedes-Benz) were built to a specification. Now they are merely built to a price." That statement alone is probably "enough said."

  • Rnc Rnc on Apr 10, 2013

    Speaking of retirement, despite being far away, I was a controller at a company that went through a massive downsizing and did it by seniority, towards the end of my employment I was amazed at the number of people (making $80-$120k) ten or less years from retirement getting rid of thier $40-$60k cars and especially trucks and suvs, for ford focuses and such (price range classes of vehicles). Makes Mulally's demand and crusade (while SAARS was still at 18MM) to switch Ford from a company that sold cars at a loss to cover cafe to a company that was going to live or die by them, that is what the future holds, especially for those who are that close to retirement and got hammered in 2007, that loss will never be recovered completely and the realization that they are going to have $1k+ month less than they thought won't drive sales buy what sales. Based on that same principle is it worth it for Ford to rebuild lincoln vs. making it the new mercury? Institutional Arrogance...I worked with a man who was a VP in powertrain at Chryco during that merger, At the first high level exec meetings the Germans rolled up in thier limos they had flown over, the chryco people car pooled in minivans, they called it Daimler-Chrysler, the Germans called Chryco business unit 28, wonder how that managed to fail.

  • SC5door SC5door on Apr 10, 2013

    Already blew through that Chrysler money, Daimler?

    • Wmba Wmba on Apr 10, 2013

      Since Benz was incompetent, they lost $37 billion on their Chrysler misadventure, besides fueling comments like yours from folks who cannot imagine that they were so idiotic, and think they stole money from Chrysler. They may have done, but they also lost their shirt as well, making their management clearly arrogant and disbelieving of their own obvious inadequacies. Now that their treasure chest is gone they just shuffle around denying reality.

  • Junebug Junebug on Apr 11, 2013

    institutional arrogance - yep, seen that too! 30 years ago I started working for a little electronics company, it hired a fat ass from Texas with the attitude to match and pretty soon our 28 dollar a share stock was worth a buck! Naturally, he and his minions golden parachuted out and we got bought/sold twice before getting picked up by a big corp that knows a thing or three about business. Me? I am the lowest nut on the scrotem pole so I've survived, kept my mouth shut and worked like a mad man and they left me alone. Now, I have 30 years in and only 12 more before I go fishing, can't help but pray every night that I survive to enjoy retirement - so close, but not close enough.