More stories related to New York Auto ShowNEW YORK – Mercedes-Benz USA, which pulls the wraps off its R-Class cross/utility vehicle, says CUVs and SUVs will take a significant share of the brand’s sales in the U.S. within 18 months.

Mercedes-Benz USA President Paul Halata admits the brand until now has missed out somewhat on the CUV/SUV craze, but he says penetration of Mercedes sales should hit 25%-28% by fourth-quarter 2006.

“We can be active with SUVs that have a car-like drive,” he says in an interview at the auto show here.

The auto maker rolled out its new R-Class CUV here, which will base at less than $50,000 and offer both V-6 and V-8 gasoline engines. A 224-hp diesel is expected to be available as early as 2006. (See related data: Diesel on Mercedes R-Class Menu)

Meanwhile, the Mercedes chief says the brand already has made substantial progress on improving vehicle reliability.

“I am completely convinced that the new M-Class (which goes on sale this week) will eliminate reliability problems,” he says. “The quality out of Alabama in the last 24 months is completely different.”

Halata acknowledges there is more use of incentives in the U.S. luxury vehicle segment today. After Sept. 11, GM’s strategy changed all the marketing fundamentals radically for years to come, he notes.

“There may be some casualties in the process, and it has affected us without a doubt,” he says. “But we still sell a product that people order and are prepared to wait for.”

He says the overall luxury segment should go unchanged in volume from year-ago, but he expects Mercedes to take a bit more share in 2005.

“We are looking to a little growth,” he says. “We want to sell a few more cars this year.”

Mercedes has additional opportunities to grow with new brands such as Smart, he says.

“We haven’t changed our position on Project SUV Smart,” Halata tells Ward’s. But he declines to set a firm date on when the vehicle would be available. He does say plans are to launch the Fortwo in the U.S. by 2007.

Halata says the Mercedes strategy board will determine the Smart SUV’s fate within the next two to three months. Reports persist quoting top DaimlerChrysler AG executives that the future of the brand, itself, remains in doubt. Some answers may emerge during DC’s annual meeting April 6.