Mercedes SLK World banner

1 - 1 of 1 Posts

Premium Member 1999 slk 230-sold
14,902 Posts
Discussion Starter #1
MUNICH -- In the never-dull, never-ending clash of luxury titans BMW and Mercedes-Benz, the storyline for years has been simple: While hidebound Mercedes stumbled about, a cool, clever BMW surged out in front.

Only now, not so much.

After several years in which Mercedes struggled to find an answer to BMW's dominance, especially the latter's swift expansion into the booming crossover market, the story has changed. And pretty dramatically.

Now, BMW is playing catch-up on several fronts, and its hotly anticipated attempt to shift the conversation last week by staging a "strategy day" in Munich fell as flat as Pfannkuchen.

This rivalry between the two German luxury giants -- more tense, embittered and closely matched than any two automakers in the world -- has hit a moment of truth. Looming ahead are the battles for China, the U.S., the ultraluxury sedan segment, self-driving electric vehicles and more. And right now, it's advantage Mercedes.

As for BMW, its strategy day last week was not only long on buzzwords and short on details, key planks seemed to borrow heavily from its competitor. All the way down to the Maultaschen served at lunch -- a specialty harking from Mercedes' home of Swabia -- it felt like an homage to BMW's archrival.

After months of work, BMW's new chief executive, Harald Krueger, presented his plans to lead the world's largest premium carmaker into the next decade -- its first new strategy since 2007 and perhaps its most critical given the tectonic shifts facing the industry.

Krueger touched all the bases, warning of the myriad risks and opportunities stemming from digitalization and announcing a new BMW i model coming early in the next decade that would combine all three megatrends: zero-emission mobility, autonomous driving and connected cars.

On the defensive
Except that industry watchers were underwhelmed, especially when it comes to the much-vaunted i subbrand.

"There's a huge time gap between the i8 in 2014 and your next brand-new car in 2021 or 2022," Metzler Bank analyst Juergen Pieper told Krueger. "Why ... did you stop the development of products for the last two or three years, and it looks like you almost give up your lead you had in e-mobility and now are coming relatively late with a third model?"

On the defensive, Krueger asked for patience after being peppered with questions on details of his plans.

"We wanted to give you the general thrust of our strategy," he told reporters in Munich. "Please understand that we can only tell you so much; the rest has to remain confidential."

Those ideas Krueger did reveal didn't sound all that original.

In fact, most already have been implemented by Mercedes. For instance, BMW said it would add another model to its luxury segment above the 7-series sedan -- where Mercedes' Maybach version of the S class already cleans up. Then, BMW said it would expand its M product program to keep up with Mercedes-AMG, which sells 10 percent more thoroughbred race cars and high-performance derivatives.

Moreover, BMW announced its first, albeit modest, cost-cutting initiative in years, dubbed "Simplify," after Mercedes already booked around 2 billion euros ($2.25 billion) in added profits last year thanks to efficiency gains stemming from its Fit for Leadership plan.

Zetsche: Rewarded with contract

BMW even went so far as to adopt Mercedes' "reuse" concept introduced under manufacturing boss Markus Schaefer, in which new production systems are run beyond a single life cycle of a model.

"You're right, maybe you hear the same things from the competition. I would expect that," BMW finance chief Friedrich Eichiner told analysts. "At the end of the day, the question is who is able to really implement, and it always was in our industry."

This flattery directed to Stuttgart from Munich is a major departure from recent years. The lack of models such as the BMW X1 compact crossover off-roader famously caused Daimler CFO Bodo Uebber -- in a rare instance several years ago -- to openly bemoan his company's own limited portfolio.

On a roll
Now, Mercedes is on a roll. The brand's worldwide volume grew 16 percent in the first two months to roughly 284,600 vehicles, thanks in part to its BMW X1 rival, the Mercedes GLA crossover. By comparison, BMW sales rose 8.3 percent to 277,300 vehicles.

Last year, BMW brand sales increased 5.2 percent to 1.91 million, while Mercedes increased 13 percent to 1.87 million.

Mercedes also bested its rivals in profitability last year, its operating margin expanding to 9.5 percent from 8 percent in 2014. BMW's core auto business dropped to 9.2 percent from 9.6 percent in 2014.

As a reward, Dieter Zetsche, who has run Daimler for more than a decade, just got another contract extension while simultaneously laying out a clear succession plan for after 2019, with Ola Kaellenius, currently head of Mercedes sales and soon to be head of product development, leading the field.

Zetsche also brushes off skepticism that Mercedes' product cycle is merely peaking after a much-lauded stretch that began with the A-class redesign in 2012 and has concluded with the new E class. He argues that it is precisely now, when the group is so profitable, that Daimler has chosen to raise investments by 40 percent.

With an average of six models launched every year, Zetsche has told reporters and analysts that Daimler is more protected than ever from the ups and downs of product life cycles.

Meanwhile, BMW is jealously eyeing Mercedes' strong lineup of S-class cars that compete with its 7 series. Here in the uppermost sedan segment, BMW has found its sporty image backfires as most customers are typically conservative and prefer stately comfort to agile handling.

As a result, BMW repositioned its 7-series flagship with the latest generation that launched in October, deliberately engineering the ride so that it more closely matches the smooth sailing of the S class. So far, it has sold more than 9,000 units over about five months. By comparison, Mercedes last year sold nearly that many S-class units every month.

Nor is BMW necessarily taking the right approach dealing with the upstarts in Silicon Valley, such as Uber or Tesla, whose investors are content to fund loss-making operations as long as there is rapid growth.

"We are looking at services that add value, services where we can charge something, where we get a return," Eichiner told analysts. "New services also have to fulfill a profitability target, and that has to be made sure going forward."

But not everyone at BMW agrees. Speaking in Ludwigsburg the same day, one of the carmaker's own nonexecutive board directors sounded a warning.

Henning Kagermann, former CEO of German software giant SAP and president of the National Academy of Science and Engineering, said auto manufacturers must adopt "a completely different mentality" and accept losses to gain share in the new frontier of mobility services.

"Scale plays a much bigger role than profitability, and most of the people here are driven by profits," the BMW director told a roomful of auto managers. "This is about reach, this about volume, not about [making] money."
1 - 1 of 1 Posts