NEW YORK – Mercedes-Benz USA has outperformed its chief competitors in a tough market this year, and that has Steve Cannon, vice president-marketing, beginning to see a glimpse of light at the end of the tunnel.

Though he admits 2009 has been a “tough year,” Cannon is encouraged by Mercedes’ gain in market share in the premium segment. While Mercedes-brand light-vehicle deliveries were down 17.4% through November, sales have fallen 23.7% for the BMW brand and 24.1% for Lexus.

“Only 5,000 units separates us from BMW (this year),” Cannon says. Last year at this time, the gap was 25,000.

“There are more signs for optimism” as 2009 winds down, he says.

Encouraging is the investment Mercedes dealers are making in their showrooms, which range from slight cosmetic tweaks to completely new $15 million facilities, under an upgrade program the auto maker is promoting.

“We're two-thirds of the way through our ‘Auto Haus’ initiative,” he says.

Cannon also is excited by progress made in selling U.S. buyers on modern diesel-engine technology. Overall, only 5% of Mercedes vehicles are sold with diesels. But in the cross/utility vehicle segment, which includes the M-Class, GL and R-Class, 18% of Mercedes customers are opting for oil burners.

The 50-state Bluetec diesel for the midsize E350 car will be added to the lineup next year, Cannon says. “We will also offer a diesel in the GLK in two years.”

Mercedes is planning a diesel option in the C-Class model, as well, though a launch date has not been set.

The marketing executive believes 10% is a reasonable target for diesel penetration for the brand overall. “We have to reeducate the American customer (on the benefits of diesels).”

Mercedes does not lose money on diesels, even though it charges only a $1,500 premium for the high-tech engines in the U.S., Cannon says. The auto maker plans to stick with the current option price for new diesel introductions, as well, he adds.

Cannon is especially pleased with the success of new-vehicle launches this year. The GLK, an all-new luxury CUV introduced in January, has sold 19,572 units so far, well within the 15,000-20,000 band Mercedes hinted at ahead of its launch.

The E-Class, which bowed at the end of June, has picked up market share against the BMW 5-Series.

“We're back squarely in front of the pack in that segment,” Cannon says.

Mercedes also is encouraged by a recent J.D. Power and Associates study rating the brand tops in owner retention. The survey says 67% of Mercedes customers are repeat buyers. Another Power survey this year rated Mercedes third in sales satisfaction, trailing only Jaguar and Cadillac.

“We're taking back leadership one step at a time,” Cannon says.

Mercedes’ total U.S. light-vehicle market share, which now stands at 1.8%, is the brand’s highest ever.

The flagship S-Class sedan is posing the most challenging problem for Mercedes.

Sales have plummeted 50% in 2009, but Cannon believes the recently launched S400 hybrid model will help turn that around. “Finally, we're able to communicate what we have in green vehicles,” he says.

Next year should offer more stability, Cannon predicts. “There will be no rollercoaster rides,” he says, adding Mercedes will launch several new products in 2010 that will help add positive momentum.

Worldwide, Mercedes sales were down 11.6% through November. Western Europe was off 13.9%, while demand in the home market of Germany slumped a less severe 10.9%.

Mercedes is doing better in a number of smaller markets. It has racked up a 20% gain in Canada so far on 22,500 units, and demand in Brazil has soared 45% to 4,600 vehicles.

Sales in the Asia/Pacific region are up 8.8%, with China deliveries jumping 59.8% to 62,200. However, demand in Japan is down 26.2% to 25,200.