Fixing Mercedes

Get the latest auto industry news and car information. Read automotive supplier news and keep up to date on the latest auto industry trends.

DaimlerChrysler boss Dieter Zetsche has set the bar high for Mercedes. He aims to match the quality of Toyota’s upmarket Lexus brand in the annual JD Power Initial Quality Study rankings by 2008. That’s a stretch goal given all the electronics Mercedes and other German premium automakers jam into each new model to improve safety and handling. Toyota reuses many components from one model generation to the next — improving reliability while leaving cutting-edge development to the Germans. Boosting quality is exactly what Zetsche needs to do to polish the tarnished star. And the cure is none too soon. In Europe, which accounts for 64% of Mercedes’ global sales, Toyota aims to nearly double its sales of Lexus in Europe to 45,000 this year and to reach 65,000 by 2010. And so far, Lexus is right on target: Its sales this year to date are up 100% in Europe, and even more in Germany. Lexus’ goal to hit sales of 65,000 in Europe is a major threat to Mercedes S-Class, which sold 70,000 sedans worldwide last year. Given the dent Mercedes has suffered over the past five years on quality, many see the company as particularly vulnerable to the Lexus quality juggernaut. With BMWs and Audis churning out cars that are more stylish and more fun to drive, and Lexus offering better quality, no wonder Zetsche is stepping on the gas.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.