Mercedes Quality Slipped -JD Powers

MSNBC reported that a blow to Mercedes’s quality reputation came last week when a normally secretive study of car quality in Europe was leaked to a German trade publication. The report, conducted for the auto makers themselves, showed Mercedes quality and customer satisfaction falling since 1999 to levels below Opel, the German unit of General Motors Corp. and a brand with one of the worst images in Europe. A separate German survey ranked the German-built Ford Focus compact car No. 1 in a study of durability during the first three years of a car’s life. The survey, conducted by TÜV, a German auto-inspection and research association, put half a dozen Toyota models ahead of the first Mercedes model — the SLK, which came in 12th. Mercedes’s quality rankings in the U.S. have also slipped, according to J.D. Power & Associates, an influential arbiter of automotive-quality ratings. In a fall study of vehicle dependability, the brand fell to 10th place in 2001 from sixth place the year earlier. It now ranks behind such brands as Lincoln, Cadillac and Jaguar.

“My personal opinion is that a brand such as Mercedes should be at the top. That’s what people’s expectations of the brand are,” said Tom Libby, director of industry analysis for J.D. Power, who lowered Power’s rating for Mercedes’s overall product quality to “fair” from “good” last week in a presentation ahead of the National Automobile Dealers Association convention in New Orleans. The J.D. Power study, which surveyed some 156,000 car owners, found that five-year-old Mercedes vehicles had 296 problems per 100 vehicles, compared with an average of 285 for autos of the same age by other luxury makers and an overall industry average of 382. Drivers were questioned about 137 potential problem areas in nine overall categories: interior, exterior, transmission, engine, features/controls, ride/handling/braking, seats, sound system and heating/ventilation/cooling. Mercedes showed the biggest declines in transmission and features/controls. The surveys are a blow for Mercedes and its parent, DaimlerChrysler AG. With its Chrysler Group unit in deep financial trouble, DaimlerChrysler has relied on Mercedes as a cash cow. At the same time, Chrysler is counting on Mercedes to help lift its own quality by supplying key components like engines. Donna Boland, Mercedes’s U.S. spokeswoman, said the company has been dealing with volume increases and more complex technology. Since 1997, it has gone from four model lines to nine. Still, she said, the company is committed to improving its quality rankings.

“Being Mercedes, quality is absolutely the highest priority,” Boland said. “It’s what our brand is based on. We will use every resource at our disposal to bring those numbers up.” Al Bedwell, research manager at J.D. Power-LMC in Oxford, England, said Mercedes’s quality issues are a byproduct of a decision in the early 1990s to focus more on what consumers want, rather than engineers, and to round out the company’s product lineup with smaller — and cheaper — cars such as the A-Class. The moves served their purpose: World-wide sales of Mercedes cars have doubled to more than one million a year since 1993, and the company has turned in repeated record profits. But it’s also hurt the brand’s overall quality ratings, which take into account all of its models together. The A-class, known as “baby Benz,” for example, had to be temporarily pulled from the market in 1998 when it flipped over during crash avoidance tests. Mercedes’s sport-utility vehicle, the M-Class, was also criticized for its interior (later revamped) and, in a Consumer Reports used-car guide, for its reliability. “It’s becoming more evident that Mercedes-build quality isn’t as bulletproof as it used to be,” Bedwell said. “At the same time, the average-build quality across the industry is increasing, closing the gap they once enjoyed.”

The most recent slap at Mercedes quality came last week, when a portion of the normally highly confidential New Car Buyer Survey was leaked to a German auto trade publication. Such surveys of European consumers aren’t typically made public because of tight privacy laws; the results are usually intended for market research or manufacturers themselves. The NCBS, for instance, is conducted for auto manufacturers by survey agencies in each geographical market. It is arguably the most thorough ranking on the Continent, measuring quality as well as general customer satisfaction. According to the NCBS survey index, the number of negative points per 1,000 Mercedes cars climbed from around 100 in 1999 to more than 110 last year. At the same time, the number of negative points on Opel cars shrank from around 130 in 1999 to near 100 in 2001. Mercedes and Opel verified the leaked portions of the report, but didn’t comment on specific faults. Johannes Reifenrath, director of communications at Mercedes-Benz passenger cars in Stuttgart, said a more detailed version of the survey showed Mercedes quality was at least as high as Opel, but he declined to provide any additional data. Reifenrath said Mercedes has been working hard to address the quality issues. “There are a lot of indications from our plants that some of those models that have been criticized are improving,” he said.

Despite the surveys, Mercedes’s reputation remains solid. With U.S. consumers, it trails only Rolls Royce in quality perceptions among auto makers, ahead of Bentley, Porsche, Lexus and Bayerische Motoren Werke AG, according to the EquiTrend study by Harris Interactive. Lexus, meanwhile, ranked at the top of the J.D. Power quality studies, well ahead of its competitors. A Europe-wide survey conducted by German magazine Auto Motor und Sport, a bible in the industry here, showed Mercedes had the third most favorable brand image, following BMW in first place and Porsche. Indeed, some analysts say surveys such as J.D. Power and the NCBS are looking at the wrong things. Quality rankings often move up and down depending on the year, they say, and companies with lots of new models, as Mercedes has had recently, tend to have more defects. Longer-term surveys, they argue, show Mercedes quality holding relatively steady.

The company may soon face the toughest test of its quality. Mercedes is preparing to launch the latest edition of its E-Class line of full-size sedans — for years a symbol of the brand. Unlike the M-Class, which is made in the U.S., and the A-Class, a daring venture downmarket, Mercedes will have no excuses if the E-Class hits a snag.