A C-Class act

Mercedes eyes bigger slice of entry-luxury segment Some people believe luxury car sales are the first to bear the brunt of an economic downturn.

But Ken Enders of Mercedes-Benz USA says that, if predictions are correct that the economy may soften this year, luxury car companies such as his won't be the canaries in the mineshaft.

"I'd say it would go the other way; that the total market would get hit first," says Mr. Enders, MBUSA's marketing vice president.

He explains, "The luxury market is more resilient to a downtown. That's especially true for us because our sales are not heavily driven by incentives that have heated up outside the luxury market. There's a higher comfort level for us."

Mercedes is synonymous with luxury. Yet MBUSA's market share thrust for 2001 will not be so much high luxury vehicles ($55,000 and up) or even mid-luxury ($40,000-$55,000) but rather the entry-luxury segment ($28,000-$40,000).

The redesigned 2001 C-Class is the car MBUSA expects will double its share in the entry-luxury segment.

That industry segment overall accounts for 900,000 vehicle sales a year. That's 70% of the nation's total luxury market. Mercedes share of that is 3% now. MBUSA wants to hop it up to 6%-7%.

Mercedes introduced new C-Class sedans a couple of months ago. In 2001, the importer will debut what Mr. Enders calls a C-Class "family of vehicles." That includes some new kinfolk such as a C sports coupe, a station wagon and a big brother AMG model with a beefed up engine and suspension system.

MBUSA expected to finish calendar year 2000 "comfortably ahead" of 1999's segment leading sales of 189,000 units, Mr. Enders says.

"The luxury segment is getting extremely competitive," he says. "The number of competitors has increased exponentially over the last five years."

MBUSA certainly doesn't shun the title of the top-selling luxury car company in America. But nor is the importer making a big deal about it.

Says Mr. Enders, "We are absolutely convinced that what is important to this brand is still exclusivity, still delivering the best product and the best value, and best services.

"If we deliver on that, then we feel that titles like `number one luxury brand' will come. But they are clearly not the target of the company nor will you ever find it in our marketing strategy."

Still getting to that top spot is an amazing story, especially considering the dismal shape the German carmaker was in about 10 years ago in the U.S. Sales hit a low of 60,000 units in 1991.

Recalls Mr. Enders, "New competitors had come into the market. The economy changed. Society changed... Pretty much overnight we found ourselves with products that weren't competitive and a brand that still meant relevant things but not all relevant things."

Mercedes back then still scored high marks for reliability, durability and safety. But the vehicles were considered overpriced and staid. "And our engine performance wasn't where it needed to be," says Mr. Enders.

The company retrenched, then launched a new product blitz.

"A basic of this business is product, product, product," says Mr. Enders. "If you don't have that, you can forget about anything else."

Mercedes also revamped its dealer network, trimming the ranks from 424 to 311 and asking them to go exclusive.

MBUSA riled some dealers in 1999 when the company cut dealer profit margins from 13% to 7% on new-car sales. The company said it all evened out because it eliminated profit-draining incentives and "deals of the month."

Still, the move left some dealers grumpy.

"Any time you introduce a dramatic change to an industry, especially the auto industry, it's going to be unsettling," says Mr. Enders. "But I think we're over that. We worked very hand with our retailer board to deal with those issues. We're on the mend in that respect."

He says one of MBUSA's biggest initiatives of late is becoming the first non-computer company to partner with COMDEX, one of the world's largest information technology trade show.

MBUSA is hooking up with COMDEX because lots of personal computer equipment are expected to go into cars of the near future.

"The average commuter spends 1.5 hours per day in his or her car," says Mr. Enders. "There are 135 million registered vehicles in the U.S...This is an amazing opportunity for the computer industry. It's certainly too important for the automotive companies to ignore."