While Mercedes-Benz is just ready to launch its first hybrid, the ML450, it remains committed to diesels, says U.S. CEO Ernst Lieb.
If he didn’t hand you his business card, you might not guess where Ernst Lieb hails from. He’s got an easy-going manner and quick laugh, not the stiff formality Americans typically associate with German executives. His accent is slight and his knowledge of the North American market – and its culture – runs deep. It helps, of course, that he’s spent plenty of time here, running first the Canadian, and now the U.S., subsidiaries of luxury powerhouse Mercedes-Benz.
The automaker once assumed an almost god-given right to dominate the luxury market, both in the U.S. and globally, but it’s had a tougher battle in recent times. The American debut of Japanese marque Lexus was one body blow, and German marques BMW and Audi haven’t made things easy, either, lately. To top that off, the current recession has been unexpectedly hard on the entire luxury market, with Mercedes sales, some months falling nearly as fast as troubled General Motors.
Even so, the German maker continues to roll out a procession of new products, such as the E-Class remake due to showrooms in the coming months. TheDetroitBureau.com’s Paul A. Eisenstein spoke with Lieb about Wonder Diesels, certified used cars, new competitors and more.
TheDetroitBureau: Mercedes is about to introduce its first hybrid vehicle, in the U.S., a version of the M-Class sport-ute dubbed the ML450. How important will hybrids be for you?
Lieb: When you look at last, with record fuel prices, there was a lot of talk about hybrids. That’s changed since fuel prices came back down. I expect fuel prices will go back up again, not stay at $50 a barrel, so this is still the right thing to do. I don’t think sales will be huge. It’s for customers who want hybrid technology. Of course, there obviously will be a price difference you have to pay for the technology.
TDB: You also remain committed to diesels, and at the recent New York Auto Show, you provided a look at a version of the new E-Class sedan, the E250, that could be outfitted with what the European press have dubbed the “Wonder Diesel,” a 2.5-liter engine that you said could go over 40 mpg, even in that big car. When do we get it here?
Lieb: We’d love to see that engine here. To get over 40 mpg is huge, but we’d love to see it, at least first, in the C-Class or maybe the new GLK, not the E-Class. We’re just not sure customers would accept it there.
TDB: How do you feel about the way the U.S. market has so far responded to the diesel offerings you’ve already introduced:
Lieb: The reception has been good and we feel we’re holding our own. The numbers are down (so far, this year, but) are matching the decline in the rest of the Mercedes-Benz line. The 250 engine would have a huge effect. It would be a game-changer.
TDB: This has been a surprisingly democratic recession, sales slumping in the luxury market, as well as more mainstream segments. Mercedes itself was down more than 25 percent in March. Why? And how long is this likely to continue?
Lieb: No matter what you look at, now, people are very, very sensitive to price. We were down, but we gained market share and feel we’re battling quite well right now. We’re trying to be as reactive as we can, going back to basics, in the trenches.
TDB: Some of your competitors have announced big cuts.
Lieb: We’re watching our expenses, left, right and center, focusing on what drives the business. It’s better to be smart and don’t fill positions when they open up. We’re not playing to lay off anybody, however.”
TDB: At the NY Auto Show, organizers opened up with comments about how such events are threatened by the changing auto industry. Do you agree?
Lieb: It’s hard to prove how many cars they (auto shows) really sell. There are some auto shows, in New York and L.A., where you have to be. But do you have to be in St. Louis or Albuquerque? Auto shows have been a huge expense – a disproportionate expense compared to their returns. In tight times, you have to watch your expenses. We’ve pulled out of some shows, but are supporting are dealers if they want to still participate. And, really, that’s how we used to do it.
TDB: We’re seeing a number of new players try to get into the automotive game, like Tesla Motors, which makes electric vehicles, or China’s BYD, which started out as a battery company. Are you concerned about this, since they mostly seem to be targeting the new market for green vehicles?
Lieb: We’ve got pretty huge resources to put into developing alternative power vehicles, whether diesels or hybrids. While we’ve made cutbacks, you’ll not hear (Daimler AG CEO) Dieter Zetsche cutting our R&D. Knowing what we’re spending, I can’t see anyone (new) coming in with a 100 percent capable solution on their own.
TDB: You mentioned that people are extremely price-sensitive. Does that mean they’re skipping the usual assortment of costly options and buying what might be, for Mercedes, a “stripper”?
Lieb: Recall that in 1993, in that financial crisis, when I was working up in Canada, our savior was the 190E, with cloth seats and manual windows. It was our best seller for over a year. But this recession is different. We have made a few changes, though, to hold down prices. On the new GLK, we made the sunroof optional, and we’re watching the take rate to decide whether to make it standard.
TDB: We’ve been hearing that a lot of potential luxury buyers are turning to used vehicles, or more specifically, to Certified Pre-Owned programs, like the one you run. Is that really hurting new car sales?
Lieb: I’d be willing to say that while the number of transactions in the new luxury market may be down 40 percent, not 20 percent of those people are switching to used cars. You’re seeing some people switch over, but I’m not worried about it.