Mercedes Shields Its Dealers

Mercedes-Benz USA is taking extraordinary steps to shield its 347 dealers from collapsing loan providers.

“That's the reason we don't have dealers in dire (financial) straits,” says Tracey Matura, general manager-strategic retail development. “We are well-placed to make it through this great storm.”

No Mercedes dealers have failed in 2008 due to financial reasons, she notes.

The current credit crunch began soon after Mercedes launched its 3-year Autohaus program in October 2007. Autohaus requires Mercedes dealers to invest a combined total of $1.4 billion through Dec. 31, 2010, when the program is scheduled to end.

Autohaus is designed to orient Mercedes outlets around how customers use the facilities. It's also focused on upgrading dealerships and marketing practices.

Most Mercedes dealers have received approval of their Autohaus projects and work is under way to bring their stores into conformity.

Ernst Lieb, president and CEO of Mercedes-Benz USA, believes his company has to back its dealer body in return for the big investment they are being asked to make.

“We're not going to allow any of our dealers to have financial problems,” he says. “We made it clear they could come to us for (financial) help when they had difficulty with local banks.”

About 48% of Mercedes dealers are covered by the auto maker's financial services. They account for 62% of the brand's sales volume.

Leib says Mercedes' financial arm continues to provide leasing support for dealers, even though leasing has dropped to 45% of overall sales. That's 10% lower than the auto maker's leasing high point and less than some competitors.

Lieb doesn't plan to unleash any costly promotions to stimulate sales in 2009, which he expects to fall 5%-10% below 2008. “Rebates don't really sell more cars,” he insists. “In this market, it's not about incentives. It's about confidence.”

Mercedes will fare better than others in the luxury-vehicle segment, Lieb says, because of new models that will be introduced during the year.

Following next month's U.S. arrival of the all-new '10 GLK compact cross/utility vehicle, Mercedes will roll out the next-generation E-Class sedan; CLK sports coupe successor, to be dubbed the E-coupe; and hybrid-electric versions of the S-Class sedan and M-Class CUV.

The new E-Class will be previewed at a media-only event preceding January's North American International Auto Show in Detroit but will not be on public display.

As proof of the brand's vitality, investors still are seeking to purchase Mercedes dealerships, Lieb says, while cautioning that auto retailing is not an easy business at this time.

“Despite that, I continue to get calls every week from investors who want to get into the Mercedes family,” he adds.

Meanwhile, Matura predicts business will improve. Even though U.S. industry sales tumbled in 2008, Mercedes gained 10% market share over 2007, she says. “We're in (business) for the long haul, for the good times and bad.”