The Road to Recovery

Acceptance is the first step on the road to recovery.

And that is the path Mercedes-Benz recently has been following, as it tries to rebuild its once-vaunted reputation for quality and starts to see positive results from its efforts.

It obviously is a top priority for incoming DaimlerChrysler AG CEO Dieter Zetsche, who also took over the top job at Mercedes on Sept. 1. The company already has been making progress.

Nevertheless, acceptance came slowly at the German auto maker, which dropped to 26th in the 2003 J.D. Power and Associates' Initial Quality Survey (IQS) and which found itself near the bottom rung in long-term reliability surveys.

The poor ranking reflected what many saw as a slow deterioration from 1994, when Mercedes was the most reliable marque — a downward spiral punctuated by complaints, recalls, the failure of the A-Class in 1998 to pass the European “moose test” for handling, and a growing case of electronics gone amok.

Sales were declining in lockstep, and parent DaimlerChrysler finally said enough is enough. The 3-pointed star was tarnished and buffing its image became priority No.1.

Remedial work is under way and showing signs of success.

The 2004 IQS saw Mercedes climb to No.10, and this year's survey saw it vault to a tie for fifth place with the Cadillac brand, despite the black eye evident in March when Mercedes issued a massive recall of as many as 1.3 million vehicles for a number of problems affecting engines, brakes and electronics.

But the effort is undiminished, and the swagger remains intact.

“It's a Mercedes policy to produce perfect all the time,” says Hans-Heinrich Weingarten, DC executive vice president-Mercedes Car Group production.

He says the March recall was to “show our customers that we are seriously behind the quality issues,” and that Mercedes will do, and spend, whatever is necessary to satisfy them.

Weingarten says, in particular, Mercedes spent “a lot of money to fix the (E-Class) wagon,” beset with electronic glitches.

And he notes Mercedes was not alone in loading up new vehicles with high-tech features. “It is not a unique Mercedes point, but it has cost us here. It is (electronics innovation) sometimes our advantage, sometimes our disadvantage,” he says.

Weingarten says suppliers develop special equipment, such as a brake system, with a common function for use by different customers because it only is exclusive to the original auto maker for six months, after which time it can be sold to competitors. His point: Others would have experienced the same problems as Mercedes. The difference in quality ratings, he says, results from Mercedes ranking near the top in electronics features per car.

But the auto maker has scaled back applications in the last two or three years, he says, especially in the content of its European models and the '06 M-Class cross/utility vehicle.

Weingarten insists quality has been on the rebound, dating back to the launch of the new-generation SLK last fall, the A- and B-Class and the CLS and E-Class sedans that debuted “without any problems.”

“The next will be the M-Class, the R-Class and the S-Class,” he assures, describing them as beneficiaries of lessons learned.

In the U.S., the focus rests squarely on Mercedes' assembly plant in Vance, AL, whose products represent 20% of total revenue for the Mercedes Car Group, says Weingarten.

The undertaking was daunting. The original plant was gutted, retooled and expanded to double capacity to 160,000 units.

It initially is producing two vehicles, from two separate platforms, customized for sale in 135 countries. The second-generation M-Class, which launched in April, switched to unibody construction and has no carryover parts from the original body-on-frame SUV. And the all-new R-Class CUV, which launched production output June 23, represents a new segment for Mercedes.

It amounted to the debut of two new vehicles, in a new plant with new workers, at a time when quality is under scrutiny.

To minimize risk, the auto maker began making changes to its supply base and manufacturing processes long before the debut of the new models.

Quality issues were tackled head on at the Vance plant in the final years of the first-generation M-Class.

By the time the original M-Class built out Dec. 9, 2004, it had achieved second best in its segment, behind the Lexus RX 330, as rated by J.D. Power.

Internally, the Vance operation was named the No.1 Mercedes plant for quality in 2004, its first time leading the field.

The award, announced in May, is based on internal scores, while recognizing the outgoing M-Class scored 96 concerns per 100 vehicles in the J.D. Power ranking, reflecting a steady improvement since scores of 200 or more in the 1990s, says Bill Taylor, president and CEO of Mercedes-Benz U.S. International Inc., and head of the Vance operation.

Finishing the lifecycle with good quality results was vital, says Weingarten. “This is basic, to improve quality.”

With a strong manufacturing foundation to build on, and high-quality new models waiting in the wings, Weingarten was confident prior to launch of the new M-Class.

“The new car is completely well done: under, over, outside, inside, engines. So I'm completely satisfied,” he says.

Equal care was spent preparing a workforce of both new and experienced employees.

Prior to launch, more than 400 workers spent up to two years at Mercedes' complex in Sindelfingen, Germany. They hand-built about 75 trial units of each vehicle, from body construction to finished vehicle, often with parts for which tooling had not yet been developed.

“It was new for us,” says Taylor. “A full build after development did not exist in our process. It's been incorporated since, and it's a great discovery point for everybody because we do it collectively with our development colleagues and our suppliers, who we take to Germany with us.”

Working on the prototypes allowed engineers to work with suppliers to make changes to parts or design, as well as tooling, early in the process.

Hiring, once again, relied on the Alabama Industrial Development Training (AIDT) program, the jewel of the state in its ability to recruit, screen and train workers. AIDT was key to landing the Mercedes plant in the first place, and was mobilized again for the expansion.

AIDT Director Ed Castile says the agency hired 1,625 workers from 58,653 applications for the original plant, and the turnover rate is less than 1%. For the second phase, about 1,500 of 45,122 applicants successfully completed the 57-hour hiring process.

There are off-line training cells throughout the plant that are part of a 4-stage process new hires must pass before they can work on their own on the line.

Many of the experienced workers spent 5-week stints in Germany being trained, returning to form ramp-up teams.

At any given time, there also are about 300 German workers in the plant, who move to Alabama with their families for a 2- to 3-year stretch.

In addition to the 22 full-time staff at the on-site training center, AIDT has added a new aspect: line-side maintenance to keep machines humming and manufacturing moving, says Castile.

“Now we're inside the plant, doing analysis, training development, coordination and delivery. It's kind of like training-on-demand. We are working with Mercedes to put it in place,” he says.

The result of all these efforts, says Weingarten, is “we start with a completely different level of quality” for the new vehicles.

Safety nets are necessary as the new models are much more complex than the 571,000 original M-Classes that were built, Taylor says. The old M-Class, for example, had about eight control modules, compared with about 50 on the '06.

The plant has implemented a new system of checks and balances, broken into four loops.

Loop one is at the end of each individual workstation, marked by a red line on the floor. There are 99 seconds to do the job in each station and correct any issues. Any team member can pull the yellow cord to call for assistance if a problem is detected. If it can't be resolved, pulling the red cord stops the line for the fix.

The second loop is at the end of every trim line and every final line. Workers with personal digital assistants (PDAs) scan each vehicle's bar code for a checklist of items to inspect.

While loops one and two test every vehicle, the third loop is a random check of bodies for items such as the wire harness that can't be inspected later.

On the four final assembly lines, workers from all areas (body, paint, etc.) pore over each vehicle, measuring gap width, opening and closing doors and assessing paint finish under bright lights that illuminate any flaws. Final checks include a rattle test, wheel alignment and roll test to assess electrical functions in different temperatures. A shower line checks seals for leaks.

Loop four is a horseshoe area where two vehicles at a time are randomly pulled from the line for complete static and dynamic testing.

Throughout the process, members must sign off on quality, and data gleaned along the way is fed back into the system.

Another new practice is that every new car now is driven to gather “rough road information because we can't hear squeaks and rattles in the assembly line,” Taylor says. “We drive every car to validate,” he says, so the manufacturer or supplier discovers any problems — not the customer.

Weingarten says it is not unique to the Vance plant. Mercedes has increased test drives of all new vehicles in the pre-production and ramp-up phases. Higher volume of testing detects more problems in the plant, as well as dynamic issues, he says.

Mercedes Chooses Collaboration Over Confrontation With Suppliers

A vehicle is the sum of its parts. So when an auto maker is experiencing quality problems or forced to issue a recall, chances are ground zero can be found in the supply base.

But the relationship is complicated. Both sides need each other, and untangling what often are long-term relationships is not easy — or necessarily the best course of action.

DaimlerChrysler AG's Mercedes Car Group is working to emerge from a low point in its history in terms of quality, including its largest-ever recall of as many as 1.3 million vehicles in March. But the auto maker refuses to point fingers.

“We don't like to address quality issues to our suppliers,” says Hans-Heinrich Weingarten, DC executive vice president-Mercedes Car Group production.

“We are finally responsible for the car and we deliver the car to the customer, and if the customer has a problem, he comes not to (the supplier), he comes to us,” he says.

Globally, Mercedes has not made a wholesale change to its supply base as a result of quality issues, Weingarten says.

“Changing a supplier will not solve the problem,” he says. “You can only solve the problem when you improve the supplier, when you enhance him or do what you can for him to stabilize the processes so he is able to deliver the level of quality you need.

“That is the thing we have seriously taken care of for this car,” Weingarten says of the '06 M-Class cross/utility vehicle, which launched in April.

Quality issues arose with the first-generation M-Class, Mercedes' first midsize SUV, assembled at a greenfield plant in Vance, AL, in a state that had never tried auto making.

Today, Mercedes is working more closely with its Tier 1s to implement better practices, and involving itself more in its suppliers' business plans.

“Our philosophy in suppliers is very simple,” says Bill Taylor, president and CEO of Mercedes-Benz U.S. International Inc. and head of the Vance plant, which relies on 35 Tier 1 and 2 suppliers.

“We pick the supplier. We'd like to have that supplier live through at least a lifecycle of a product and we work very closely with them,” Taylor says.

A handful of suppliers were changed during the lifecycle of the original M-Class, “because we couldn't tolerate some performance,” he says.

“Clearly we want to maintain our suppliers, because that's a whole lot easier than starting somebody up from scratch,” he says. “But there's an accountability — and that's fair for everybody.”

A small number of new suppliers were added for the '06 M-Class, the second-generation CUV that drops body-on-frame for unibody construction, as well as the all-new R-Class CUV.

But the bigger change is the checks and balances in place today.

For the new models, “we brought all of our key suppliers in and we went through their business plan in minute detail,” Taylor says.

“We looked at their hiring; how they were going to bring support work; engineering; how they were going to start up their factories; where they were going to locate their factories. And when we didn't find the detail we were looking for, they came back and that became the starting point.

“That gave us some basis to go into their companies, as they were starting to facilitize and hire and so on, and see if they were following the plan. And see where the gaps were,” Taylor says. “And there are gaps. It's normal.”

The onus is on the auto maker, Taylor says. “Our business is to build cars with the quality standard the customer is looking for. Suppliers are an extension of us, and we set the specifications.”

It is the OEM's job to look at business models in its supply base and help suppliers train. “You can't just start up with new people and new plants and expect everything to be smooth,” Taylor says. “We recognize that. We learn every day. It's not at the end of a model year that we say, ‘Let's do something else.’”

Delphi Corp. built a dedicated plant about 6 miles (10 km) from the Mercedes plant in 1996 to supply the original M-Class and secured more work as a systems integrator for the new models.

The supplier expanded its plant to meet the doubling of Mercedes' capacity.

Delphi Plant Manager Brian Donato has seen expectations escalate as well.

“The biggest push I've seen is the quality push,” he says. There have been some shared workshops on reducing cost, but always in the context of quality.

“The quality expectations (today) are much different,” says Donato.

The relationship between the supplier and auto maker also has changed. Employees spend more time in each other's plants.

How quality is addressed and audited, is “much different today than three years ago,” Donato says.

The changes started during production of the old M-Class. “Near the end of its lifecycle, we had a hard push to address quality so now we are able to focus on the new product.”

Not only does Delphi have twice the volume, the instrument panel, front console and cockpit modules it is producing are more complicated.

The supplier installed a new system whereby every time a worker takes a part (there are 1,200 part numbers), sensors screen it electronically and an alarm goes off if it is not the right one. And work cannot proceed, as it won't generate a tag to continue, Donato explains.

Delphi already was using the system for some General Motors Corp. programs, including the Pontiac G6. “But the expectations (from Mercedes) are different from other GM plants,” Donato says. “Some would say excessive.”

Across the street, Johnson Controls Inc. also built a plant in 1996 to supply Mercedes, and expanded when the auto maker did, says Larry S. White, who manages JCI's Mercedes business in Cottondale, AL.

The system integrator won more contracts for the new models, including seats, overhead systems (headliner, electrical), consoles for the second row of the R-Class, door panels, pillars, quarter-trim panels and some small floor pans. It equipped its plant with some of the latest technology and tracking to manage the complexity.

“(Mercedes) set the quality targets for us,” says White. “We design to those targets, as well as cost targets.”

The pecking order is clear, he says. “Their first focus is on quality, then we work together for cost targets.”

White credits Mercedes as having a “good supply development organization.”

Weingarten stresses the importance of both managing and supporting the supply base, from first to final step, to get the desired quality.

“(We) check the quality systems, check (the) production system, check the logistics systems, we check the ability of the management team and we give them an audit” in order to avoid problems at key suppliers, he says.
— Alisa Priddle