Mercedes Gets Back Up To Speed

DaimlerChrysler (DCX ) Chief Executive Dieter Zetsche may be losing sleep over the woes of Daimler's U.S. unit, Chrysler Corp., but he's sure to be breathing easier about once-troubled Mercedes-Benz (DCX ). On Oct. 25, when Chrysler reported a $1.5 billion loss for the third quarter, Mercedes posted a 127% jump in operating profit, to $1.2 billion. Sales are up 9.3% this year, and analysts expect the turnaround to stick. "The downward spiral," Zetsche says, "has changed direction."

Mercedes' improved fortunes couldn't have come soon enough. The prestigious automaker is finally emerging from the most painful stretch in its 127-year history: a three-year slump in which its once-hallowed reputation for quality and engineering took a beating even as rival BMW surpassed it in global sales. Mercedes' fall in recent years was so precipitous it helped spur the early departure of former CEO Jürgen Schrempp.