How Mercedes steers clear of Europe's auto problems
Stuttgart, West Germany
"Technically we can meet almost anything," asserts Gerhard Prinz, chairman of Daimler-Benz AG, West Germany's prestigious automaker. "The big question is the cost," he continues.
However, the European auto industry so far has been unable to agree on uniform standards -- emissions, lighting, and a host of other things -- that not only make the cars more expensive but less competitive in the marketplace as well.
"That's our big trouble here in Europe," Dr. Prinz hammers. "We have too many different attitudes within the European Community [EC], not only in regard to the automobile, but in everything else."
Several European countries are going their own way on emissions standards for cars, for example.Lighting standards differ. "I admit it is a very big problem, " Dr. Prinz insists.
Does he see the possibility for more standardization?
"In the EC there is the organization to do it, but the independence of the governments sometimes hinders the use of the possibilities which they really have."
Echoing a plea by the West German minister of economics, Dr. Prinz urges the representatives of countries "to sit down together . . . with less egotism, less nationalism, and less pride, and not to think that one's own way is the only way."
On Jan. 1 this year Dr. Prinz rose to the top at Daimler-Benz AG, succeeding Dr. Joachim Zahn, who retired.
Yet despite the shift in command at the top, there is no shift in course as the builder of the famed Mercedes automobile shows its uncanny ability to navigate through roiled economic waters, all the while maintaining its employment and protecting its profits.
In fact, at a time when the West German auto market is off 10 percent and other carmakers are slashing output, Daimler-Benz is increasing its production. "In 1979," Dr. Prinz reports, "we built 422,159 cars. This year we will build slightly over 430,000."
The company now is repeating what it did after the 1973-74 Arab oil embargo, when Daimler-Benz was also able to maintain a very level course even as the bottom fell out of the world auto market in general.
Daimler-Benz has about 10 percent of the West German car market.
Of course, Daimler-Benz is not the average auto company with a string of cars to attract the mass buyer, nor is it a low-volume company with a narrow appeal.
The secret may lie in the astute management of the company at the top and the fact that D-B always tries to undershoot the demand for its cars, a tactic that has worked well up to now. In fact, the stolid West German carmaker has enough car orders already in hand to maintain full employment through 1981.
To ensure what it hopes will be a continuing strong demand, the company is now emphasizing the durability and technological advantages of the marque instead of the creature comforts alone.
Also, Daimler-Benz is not really affected by the rising success of the Japanese carmakers in Western Europe, because its vehicle markets are not the same. The Japanese are finding their buyers in a much lower price stratum than that in which the Mercedes is sold.
"We have no reason to fear the Japanese competition," says Dr. Prinz, who came to Daimler-Benz as head of purchasing in 1974, previous to which he worked for Volkswagen.
Looking ahead, he sees a rising demand for the company's cars, not only in Western Europe but in the United States and other markets of the world.
Earlier this year the company put into operation three new multistory buildings in Sindelfingen, south of Stuttgart, increasing the assembly capacity from 300,000 cars a year to 430,000. Sindelfingen is considered one of Europe's most modern auto factories, with high quality as well as productivity.
Now it is planning to increase car capacity in Bremen, where the T-series station wagon is built, from 25,000 units a year to between 80,000 and 120,000 a year.
Productivity at the truck facility at Worth, near Karlsruhe, also is being increased but there is no plan to expand the equipment, buildings, and so on.
The total capital expenditure by 1985 is pegged at $5 billion to $6 billion, which may seem small compared with General Motors' $40 billion, but the production and market coverage is minuscule by comparison.
While Daimler-Benz will sell some 50,000 cars in the US this year, about 75 percent of them diesels, and is expanding its truck penetration in the marketplace as well, it has failed to make any inroads with its special-purpose, four-wheel-drive Unimog, which is designed for off-road operation. A lot of the demand for the vehicle comes from the West German Army.
As with every other auto company in the world, Daimler-Benz is concerned with two basic trends for the future -- performance and fuel economy.
"Our target is to combine all the classical Mercedes features with the trend toward higher fuel economy," Dr. Prinz asserts. Not only are the new S-class cars, he says, lighter and more aerodynamic, but fuel consumption has been cut sharply.
"I think this will be the path we have to follow: to satisfy the fundamental demands of the times through advanced and proven technology," he adds.
Daimler-Benz will produce its compact W-201, a new model at the low end of its expansion program, in 1983. "Keeping up to date is essential when competing with the other companies," Dr. Prinz says.
Meanwhile, Daimler-Benz had its best year even in 1979.
"I do not think the results in 1980 will be much less than 1979," concludes the chairman of the board.