By on April 10, 2013

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.

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40 Comments on “Daimler In Trouble – And It Will Get Worse...”

  • avatar

    Let’s see, take one of the most prestigious brands and dilute it first by lax quality and now by aping Hyundai styling and you get a manufacturer that has lost its way. Lexus in 1989 sent shock waves through M-B and they have been off course ever since.

    If I want a Sonata, I’ll buy a Sonata. And I think it will be a better car than a current M-B.

    • 0 avatar

      Actually, MB is suffering b/c they didn’t follow BMW and Audi quicky in offering attractive sub-emtry level models (only offering the underwhelming A and B Classes) and mismanaging the China market.

      MB is now trying to make amends at the sub-entry segment with the CLA and its variations.

      The upcoming new S Class will probably be the best S Class ever and the old one still sells well despite being really long in the tooth and costing a cool $20k more than an LS460.

      • 0 avatar

        Can’t speak for the A-Class, but I understand a new version was into’d in October. Time will tell how it “whelms”.

        B-Class sold about 145,000 units in 2012, more than 50% above 2011 and not far from A3 numbers (165,000).

        CLA, like the A3 sedan, is probably aimed squarely at the US market, not global markets.

  • avatar

    The real problem is that the economy is still in turmoil. This generation is choosing smartphones and cable bills over car notes and the ever increasing price of insurance. The older generation that has grown up with lame Japanese imports doesn’t feel they need luxury cars – so they opt for Lexus.

    I’m glad Mercedes built an affordable baby Benz in the CLA and the C-coupe, but their interiors are boring and you are paying for the name rather than getting a great car.

    • 0 avatar
      Kyree S. Williams

      I know that Lexus doesn’t make the hoity-toity factory-sanctioned limousine that is the S-Class…but how is Lexus not a luxury automaker with luxury cars?

    • 0 avatar

      Not RWD Lexus models.

      And the long in the tooth S Class is still selling well despite being $20k more than an LS460 and the E Class is selling better than ever in the US market (much, much better than the Lexus GS).

      Where MB is hurting is in sales of the sub-entry market and in China and other Asian markets.

  • avatar
    CV Neuves

    I think it all started under CEO Schrempp who wanted to transform Daimler-Benz to a “World Inc”, making big investments that eventually failed: EADS defence and Chrysler. Then they saved on quality, innovation and added drab styling. The consequences of the 2008 GFC being bad enough, it does not help that successive German governments transform the country successfully to a low wage economy.

    Beyond that, under the leadership of Germany, Southern Europe has being express freighted into the third world.

    The product range – A-, B-,C-, E-, G-, M-, R-, S-Klasse, CLA, CLK, CLS, GLK, ML, SL, SLK, SLS, Citan, plus the same lot in AMG – is probably completely out of control of everybody.

    • 0 avatar
      Kyree S. Williams

      You forgot the Motor Trend Sport Utility of the Year…the 2013 GL…

    • 0 avatar

      The company I worked for in the mid-90s was a supplier to both GM and Chrysler. We also sold a little bit to Ford, but not much. At that time, Chrysler was widely regarded as perhaps the best-managed car company in the world. Mercedes was not.

      All of Schremps moves seemed more intended to advance/preserve Schremp’s position than to deliver any benefit to Daimler. Certainly, the decision to drive out virtually the whole Chrysler management group and parachute in mediocrities from Stuttgart who owed personal loyalty to Schremp cannot be justified on any other basis.

  • avatar

    Couldn’t have happen to a more deserving Car Company and CEO.

  • avatar

    Wait until the same thing happens here, when all we baby-boomers are retired; me in three years, hopefully.

    I most likely have bought my last brand-new car. Wifey and I already have decided that her 2002 CR-V replacement will be used, two, three years old.

    Sorry, OEMs, but us and many others have, or are in the process of simplifying our lives drastically, and taking on an expensive note on a new car just isn’t important, anymore.

    For me, that kinda hurts, because the upcoming Impala really attracts me…

    • 0 avatar
      DC Bruce

      “Simplifying” is a nice word for it. Other words might be “de-leveraging” at least for the majority of people who are looking forward to retiring on a combination of Social Security payments and unpredictable income from their “nest egg” or whatever’s left of it.

      Another unanswered question is where people are going to retire, because that affects greatly the amount of mileage on their cars. Are they going to stay in the suburbs, move to a smaller city or town, move into the city? All of these impact vehicle mileage, as does the simple elimination of the daily commute back and forth to work.

      • 0 avatar

        Completely agree about where people retire will dictate car usage.

        If your nest egg is in the stock market then it should be doing OK since record highs have been hit recently. Not saying the under lying economics support that but it does mean nest eggs/401K’s invested in the stock market should have risen in value.

      • 0 avatar

        My parents still live in the same suburban house that they moved to in 1967. Two retired couples in the neighborhood moved away, and that was to brand-new retirement communities located in rural areas.

        Most people are staying in their homes until they die, or have to sell because of health issues, in which case they move to either an assisted living facility or a nursing home. They aren’t moving back to the city to experience the geriatric version of “Sex and the City.”

        Most people will probably continue to live in their current homes until health issues make it impossible for them to do so.

    • 0 avatar

      Buy used, or buy new and keep it longer.

      We recently replaced our 9 1/2 year old A4 with a B-250, which we anticipate having for another 8-9 years. Whether you spend $40 grand on new and keep it 8-9 years, or spend $20 grand on something already 4 and keep it 4-5 years, cost of ownership is about the same. Either way, as Zackman says, it doesn’t bode well for OEMs.

  • avatar
    Jeff S

    @Zachman–You have summed it up exactly. In a few years I too will retire and my wife currently has a 2000 Taurus with 71k miles since new. We liked the Impala and La Crosse but at 40k we will probably skip those and buy a CRV because it will fit in better with our lifestyles.

    @DC Bruce–My wife and I are driving much less now and our next vehicle is probably going to be our last vehicle.

    • 0 avatar

      Neighbors of mine who have retired have a CRV and a MX5 – obviously the MX5 is the fun car. But the CRV (or some other small crossover like a CX5) fullfil multiple roles – comfortable roadtrip car, able to take passengers and a versatile cargo area (unlike say a midsize car). Whilst being reasonably priced and not too big to park.

      • 0 avatar

        We sold our 2007 MX5 last summer to a neighbor across the street. No more toys – at least until I retire and no longer need a long-distance cruiser.

        Two cars only from now on.

        Also for the record – I would NEVER own a CR-V for myself, as I dislike SUV/CUVs for my ride, but it’s the perfect family “truckster” – and wifey loves it.

  • avatar

    A question: other than “brand” what defines a luxury car these days?

    Since nearly every component is purchased from an outside supplier, no manufacturer can have a technological advantage for very long, particularly with safety and interior entertainment items. Even affordable cars now offer not only navigation but even self parking options. If anything, I don’t want a car in which i am forced to pay for navigation I already have in my pocket on my phone. Personally, I don’t care for many of these items but technology and fancy options were once definitions of luxury cars. This just isn’t the case anymore.

    In terms of quality, with very few exceptions it seems there aren’t really any bad cars anymore… At least not the way one used to say a Mercedes would be passed down to the next generation sort of quality. If anything, “luxury” marques like Mercedes, BMW, and Audi cost much more to keep on the road (at least after the free maintenance part of the warranty expires). Having owned three BMWs, I would personally be hard pressed to own one outside of a warranty. I wouldn’t say the same thing about a number of Japanese and American cars.

    And, as economic growth remains static and younger generations are doing worse than their predecessors who have sucked the system dry, conspicuous consumption won’t be as popular. So, those expensive brands may end up being a hindrance in some social circles.

    Why pay so much more for a three-pointed star or a roundel?

    • 0 avatar

      If you have to ask, it’s probably because you don’t know.

      • 0 avatar

        Exactly my point. If I, as a long-time car nut, can’t answer the question, then either Meredes has failed to explain it or the differences between luxury makes and cheaper ones are simply too small to ascertain and the general (non-enthusiast) buyers will eventually catch up.

        Case in point is Volvo. For decades, their defining characteristic was safety. They can no longer credibly claim an advantage here; not because they got worse but rather because everyone else got so much better.

        Features like keyless entry/start, backup cameras and self parking were only available on a top-level Lexus a few years ago. Now they are optional on much more affordable cars like a Ford Focus. With six speed automatics fairly commonplace, do most consumers put a lot if extra value on an eight-speed? Do most of them even know what this means?

        One could argue that paint quality and NVH are benefits to a luxury marque… But then again, one doesn’t get charged extra for metallic paint on a Kia, so why do BMW and Audi still get away with charging extra?

        • 0 avatar

          ” . . . so why do BMW and Audi still get away with charging extra?”

          They don’t–at least not always. We told our BMW dealer we would not pay extra for metallic paint on our X3. They said it costs more and they can’t change the price. I noted that it costs more to ship an X3 from South Carolina to California than to Virginia and asked them to reduce my delivery by (go figure) the amount of the metallic paint surcharge. Naturally, they said no. So did we.

          I’d be marginally sympathetic to the greater expense of metallic paint if they offered non-metallic colors beyond black and white.

          • 0 avatar

            So what did you buy?

            (I’m not surprised you got laughed out of the showroom for trying to negotiate destination. While many things about car pricing are negotiable, that’s one of the few things that’s not.)

            Don’t forget Mercedes, stevelovescars. Usually it’s black, white, and red that are no-charge if I remember correctly, same as Audi and BMW. However, I believe BMW’s current metallic red has an up-charge.

        • 0 avatar

          I guess it’s similar to luxury hotels. I travel a lot for business. When I stay at mid-priced hotels I usually have a couple of bottles of free water waiting in the room and
          free wifi. When I go to a luxury hotel and pay twice as much, I get nickel and dimed to death AND then they overcharge for a bottle of water and wifi. Personally, I just chose to stay at the less expensive place since I’m not usually enjoying the extra amenities a luxury place offers. Let’s just say that I’m rarely sitting there staring out the window at the golf-course view.

          It pisses me off to pay $8 for a bottle of water but some people obviously don’t mind. It’s ust like paying extra for things like paint somehow are justified because of some mystical brand; which really comes down to having other people see you driving the car.

          • 0 avatar

            Having worked in the hotel industry, I can tell you that the reason for the difference is simple.

            People who stay in mid-price hotels are either paying out of their own pocket (self-employed or vacationing), or are on fixed per-diems. They demand good comfort and high value.

            People who stay in 4- and 5-star hotels are not paying the freight themselves. Their employers are. So they’ll pay the $8 for a bottle of water from the minibar, and $15 for wi-fi – it’s not their money that they’re spending.

          • 0 avatar

            Personally I’ll pay the difference to get a quieter hotel room, or a better pillow and mattress — not to get free wi-fi or a $1 bottle of water.

            Similarly, I would expect an Audi, BMW or Mercedes to provide premium materials, driving experience and fit/finish, rather than more electronic gadgets at the same price.

          • 0 avatar

            It isn’t the fact that you’re paying for the water, it’s the nickel and diming for items that “lesser” brands just include… All while claiming to be luxury and provide a better user experience.

            You do make an interesting note in the bed. The analogy is also similar. Over the past few years, all of the hotel chains have been in a “bed war.” One introduced a trademarked heavenly bed (or something, I can’t remember exactly). The next chain copied the idea but added adjustable beds, or feather pillows, or whatever. Once all of the chains had some sort of bed technology, these once differentiating factors ceased being different.

            Car tech was similar. No longer can a manufacturer maintain a competitive advantage with an accessory, or the number of cup holders, or warranties. It comes down to quality, perhaps, but there likely isn’t a car on the market today that won’t go 150k miles with normal maintenance. Performance? Japanese family sedans with 4-cylinder engines exceed the performance of premium German sports sedans from 15 years ago… And most consumers don’t really care.

    • 0 avatar

      The long in the tooth S Class is still selling well despite being $10k more than the 7 Series and A8 and $20k more than the LS460, E Class sales are better than ever and the new big MB CUVs are doing very well for Daimler.

      Wealthy Americans are still very much attracted to MB and are willing to pay a premium.

      The problem is in Europe where MB fell behind in the sub-entry market (now trying to catch up with the CLA) and in China and other Asian markets.

    • 0 avatar

      For me it is all about the drive. There is simply nothing else available in the US market that drives like my BMW wagon. Now there isn’t even a BMW wagon that drives like my BMW wagon, since BMW has seen fit to make the new one AWD and automatic only. Shame on them, but good for me as it removes any temptation to buy another one. My family plot is more than big enough for me to be buried in the thing.

      As for owning one past the warranty – don’t be stupid. It costs FAR more to buy one than to maintain and fix one, even at BMW dealer rates. Helps to avoid the more egregiously expensive future failures, like self-steering Xenon headlights, awd, and automatic transmissions.

      As I have said on here before, if what makes a 3-series cost $15K more than a Camry is lost on you, enjoy your Camry and save a pile of money.

  • avatar

    Gotta love the Bert man:

    “Eroding sales in Europe and problems in China, paired with institutional arrogance, made Daimler fall far behind rivals Audi and BMW.”

    Come on, tell us how your really feel, don’t hold back….

  • avatar

    The European Union can ill-afford the decline of a manufacturing center like autos. Sure, they raised fuel taxes to discourage oil consumption and finance mass transit, But just as socialist French President Hollande reversed course on taxation when the economic nitty met the gritty, so can the EU.

    Fortunately, they’re just authoritarian enough to be able to make driver’s licenses and even car ownership mandatory. Combine that with stringent safety inspections that force older cars to be scrapped or shipped out of the Eurozone, and the problem is solved.

    • 0 avatar

      The EU is authoritarian enough to impose mandatatory car ownership? It would be funny if you meant it as a joke but this level of delusion is just sad. And even if the EU had this power (which it certainly does not have and never will have) this policy would go so much against the ongiong trends (see the 100% – 150% tax on cars in Denmark anad other policies especially in Scandinavian countries).

  • avatar
    fintail jim

    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.

    • 0 avatar

      Please, Jim, it’s nowhere near enough. What was the C250 like and what was wrong with it? The journos keep lying to us and we need a honest look biased by the real life.

      • 0 avatar
        fintail jim

        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.”

  • avatar

    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.

  • avatar

    Already blew through that Chrysler money, Daimler?

    • 0 avatar

      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.

  • avatar

    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.

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