Seeing the Back of ‘Bullshit Castle’
One man is watching the recent dramas at DaimlerChrysler with a special perspective. He's entitled to, because this year's Frankfurt show, only a month away, will see the launch of one of the last and one of the finest cars created on his watch, the new and eighth-generation S-Class Mercedes-Benz. But will Jürgen Hubbert be a non-person at Frankfurt, as he's been ever since his retirement two years ago? Shoved to the sidelines to keep his amazing career from overshadowing the lacklustre achievements of his superior and successor? I have every hope that Hubbert will get the credit he deserves, writes Karl Ludvigsen.
As Jürgen Hubbert rose through the corporate ranks of the Swabian company the man in charge of the Mercedes-Benz marque was Werner Niefer. Not for nothing was the robust, knowledgeable Niefer known as 'Mister Mercedes'. Niefer showed the younger Hubbert the way forward when the latter was appointed head of the passenger-car division of Mercedes-Benz in 1989.
Both men were credited by the company's chairman at the end of the 1980s, Edzard Reuter, with initiatives that secured the future of the Mercedes-Benz brand. 'Above all there are two names without whom the success would be unthinkable,' said Reuter: 'Werner Niefer and Jürgen Hubbert. Already at that time these two began to develop that strategy which, in the second half of the 1990s, would aim toward a shrewd broadening of the traditional Mercedes-Benz model range, the so-called "Model Offensive".'
Hubbert had his hands full when he stepped into the passenger-car job at Daimler's Untertürkheim headquarters. Mercedes-Benz market share was down 1.7 percent and the average age of its owners was up to 52½ years. As Germany's executive-car icon Mercedes was under heavy assault from its feisty competitor in Munich — a rivalry that constantly spurred both companies to higher performance. As well there was a new opponent on the block. Toyota's Lexus was forcing fresh assessment of value for money and customer satisfaction in the luxury-car category of the vital American market.
The Niefer-Hubbert assault on these problems was two-pronged. One prong was the development of a successor to the 'Baby Benz', the 190, that was built to strict and binding cost targets for the first time. Hitherto, the engineers built the cars and assumed someone would buy them. Now the new model, the first C-Class, was rigorously engineered to meet its market targets. When it was introduced in 1994 the C-Class was dubbed the 'Rescue Wagon' of Mercedes-Benz by some observers. 'We didn't like it,' Jürgen Hubbert said, 'but it wasn't far from the truth.'
Matching the new car's marketing with its design, Hubbert engaged a new advertising agency, Springer & Jacoby. It brought a fresh style to the company's communication which, like Hubbert himself, stressed 'self-confidence, humour, understatement and facts.' Prompted by the agency, Mercedes shattered precedent by advertising the base price of its new C-Class: DM40,825. To its Konstantin Jacoby, Hubbert joked, 'If we sell too many of these cars I'll have to get rid of you, because we'd have no more money with which to pay you.' Fortunately the average C-Class sold for nearer DM50,000.
The other prong of the 'Model Offensive' was the introduction of a radical new small car, the A-Class, a front-drive Mercedes for the first time. Its aim was to provide product protection at the base of the Mercedes-Benz range, just as the 190 had a generation earlier. It would, said Hubbert, 'redefine the concept of a subcompact car. It is proof that the traditional Mercedes qualities, such as safety, comfort and reliability, can also be incorporated in a significantly smaller car. This contributes toward ensuring mobility in conurbations in the future.
'When we launched the A-Class,' Hubbert said later, 'I was criticised for stretching the brand name too far. But exactly the opposite happened. That model opened a completely new segment for us.' In a style again unprecedented, the advertising and marketing launch of the A-Class began a year and a half before its launch. This gained outstanding acceptance for the new model, acceptance that stood it in good stead when it suffered its Scandinavian setback. And its second generation provided the basis for a larger B-Class model as part of a new family that includes both cars.
In Edzard Reuter's decentralised and diversified Daimler-Benz, the Mercedes-Benz vehicle operation was a stand-alone business in its own right. It was deprived of its powerful leader in 1993 when Werner Niefer succumbed to illness. Parachuted in to lead the all-important vehicle company, financial powerhouse of Daimler-Benz, was Helmut Werner. With remarkable speed and effectiveness Werner became the arch-advocate of Mercedes-Benz. 'Werner fought for the company,' Jürgen Hubbert recalled. 'What he could do best was selling. He sold the company. He sold the brand. And he was someone who gave you freedom to do your job. He gave you all the freedom you need. He had great support inside Mercedes.'
Werner and Hubbert faced troubled years together. The vehicle unit lost money in 1993 and Daimler-Benz was a money-loser in 1995 in spite of improved profitability at Mercedes-Benz. Both men exploited these exigencies to put through further cost-reduction measures. In 1993 Jürgen Hubbert showed the steel behind the smile when he led negotiations with the workforce to forge a suitable basis for making the A-Class in Germany. 'If our wage partners remain this intransigent,' he warned the unions, 'we'll be compelled to build the A-Class in England or France instead of Rastatt.' He got his way, to the benefit of industry in Germany.
Under new company chief Jürgen Schrempp the mantle of Mercedes-Benz defender passed to Jürgen Hubbert in 1997 when the vehicle unit was merged back into Daimler-Benz. This brought turmoil, as did the merger with Chrysler a year later. Through these dramatic changes Jürgen Hubbert kept Mercedes on track. In 2000 he celebrated his unit's first million-car year. Turnover was up 73 per cent from 1990, exploiting a product range expanded from six to 15 model series, and average customer age was 50 years and falling. Globalised production included the M-Class in the United States, A-Class in Brazil and C-Class in South Africa.
Through the chaos of the 'merger' with Chrysler, Jürgen Hubbert saw his duty as defending the independence of the Mercedes-Benz marque, protecting it from those who urged cost-saving commonality with Chrysler. In doing so, said one observer, he 'spoke of the Mercedes brand as if its sanctity and distinction were beyond comparison.' In their book about the merger Bill Vlasic and Brad Stertz said, 'The fifty-nine-year-old head of the Mercedes passenger-car unit considered himself the true guardian of the proud legacy of Gottlieb Daimler and Karl Benz. Dignified-looking, with wire-rimmed glasses and silvery hair swept back from his high forehead, Hubbert wielded serious power in Daimler's decentralised corporate structure.'
The Hubbert legacy at Mercedes-Benz is awesome. We'll soon see his new S-Class and not long after that his final C-Class iteration. Critics agree that the latest SLK-Class is an exemplary roadster. Sales of the latest M-Class are up and the CLS-Class coupe-sedan continues to make waves. With these models doing so well I can't be too worried about some weakness of the E-Class, with which several of the new models compete in Mercedes showrooms. The new R-Class, which is getting rave writeups, will adequately fill that gap.
What of DaimlerChrysler's other initiatives? The ill-fated Swatch venture dates back to the era of Helmut Werner, who took up a project that Ferdinand Piëch turfed out of Volkswagen. Although not strictly in his ambit, Hubbert defended Swatch as 'a laboratory' in which the company could experiment with new ways of making and selling cars. Many would argue that the laboratory has now served its purpose and should be shuttered or sold off.
At the other end of the scale is the Maybach, with which Hubbert can't escape an association. In contrast to Volkswagen, which took a luxury nameplate in Bentley and made it affordable, Mercedes-Benz took a little-known exotic nameplate — a major money-loser in its heyday — and is charging the earth for it. Debate in the company was intense about how to position this rival to BMW's Rolls-Royce: as a marque in its own right or as a top-of-the-range Mercedes model. With sales languishing at 600 per year against the hoped-for 1,000-plus, it's clear that the wrong decision was made.
Both Smart and Maybach are issues that new DaimlerChrysler chief Dieter Zetsche will need to tackle. But he won't have to do so right away. No one expects either problem to be solved soon; in the meantime Zetsche has good people in place dealing with both products. His focus instead will be on the mainstream Mercedes operations. Here his experience in engineering and production will qualify him eminently. 'Zetsche will walk through Sindelfingen and see exactly what's going on,' said an Untertürkheim insider. It's in these core manufacturing and assembly operations that the company's acknowledged quality shortcomings must be addressed.
Here the outgoing head of Mercedes-Benz operations, Eckhard Cordes, was utterly at sea. An able finance man, a competent corporate analyst and strategist, Cordes had no grasp of the realities of carmaking. He was easily buffaloed by his engineers and production aides. Nor did he have petrol in his veins. 'He tried to make a car guy of himself,' said a Mercedes executive, noting Cordes's awkward appearances at a few Formula 1 races. Nor did he show anything resembling loyalty to his troops at the end with his sale of 92,500 shares of DCX stock and the exercise of a similar amount of options. 'This didn't sit very well with a lot of us who don't have such options,' said one of those troops.
Neither was Jürgen Schrempp an executive able to command an automotive company from a base of intimate knowledge of its operations. An apprenticeship as a Mercedes-Benz mechanic proved an insubstantial basis for mastery of the production of some of the world's most complex automobiles. An outstanding dealmaker, Schrempp was an ineffectual manager.
Ironically this very lack of managerial skill served to insulate him from criticism over his fiascos. About Chrysler's struggles in 2000, for example, he said that 'the operational issues have nothing to do with what I term an absolutely perfect strategy.' His strategy, he said, simply needed 'operational implementation'. That was for others, not for the almighty Jürgen. 'Schrempp is the poster child for overwhelming vision and underperforming execution,' sniffed Peter Brown in Automotive News last year. Rightly enough, Brown added that 'vision without execution is a road to ruin for investors and employees alike'.
Small wonder, then, that both Schrempp and Cordes wanted to see the back of Jürgen Hubbert, who proved amply capable of both vision and execution and whose automotive know-how put both in the deep shade. It was a sign of their fear of this exceptional individual that they denied him the courtesy of a transitional office and car and driver after his retirement. Many think it likely that Dieter Zetsche will right this wrong as a justifiable tribute to the man who has given Mercedes-Benz by far the most attractive product range in its long history.
Many are forecasting that Zetsche will be forced to choose a new head of Mercedes-Benz before the Frankfurt Show, to demonstrate action and control. I'll be surprised and indeed disappointed if he does so. In the interim he has a capable chief operating officer there, Rainer Schmückle, who's well able to hold the fort. Zetsche needs to have direct contact with his Mercedes-Benz people to form a view of their capabilities before he nominates one of them to head the three-pointed star. This would take him at least until the end of the year.
Postponing the naming of a Mercedes-Benz chief will suit the supervisory board, which famously went on holiday after the Schrempp announcement. This is the board which delayed the firing of Schrempp until it had a clear view of a potential successor. None was in view until Dieter Zetsche achieved the signal success at Chrysler that had him named American Executive of the Year twice in a row by Automotive News. Subtly, as well, Zetsche mounted a campaign for the job, popping up in editorial pages and conferences in Germany with remarkable frequency in recent weeks. He made sure he wasn't overlooked.
Dieter Zetsche will easily be able to be able to head both the company as a whole and its Mercedes-Benz auto arm for the time being. He doesn't have to worry about Chrysler, where his successor is eminently qualified Canadian production expert Tom LaSorda. You may remember LaSorda as the engineer who headed the creation of Opel's Eisenach plant, a model of productive efficiency. He's also installed at Chrysler a rigorous 'Fix it Right Now' follow-up system for stopping problems spotted at warranty level by using methods pioneered at America's Centers for Disease Control and Prevention. In the tradition of other production experts such as Wendelin Wiedeking and Bernd Pitchesrieder, we can expect strong performance from Tom LaSorda at the helm of Chrysler.
We can also count on Dieter Zetsche to bring LaSorda's take-no-prisoners attack on quality problems, based on daily inputs of warranty data from dealers, to the plants of Mercedes-Benz. It will speed identification of the sources of the faults that are undermining the famed Mercedes reputation for outstanding engineering and quality. Although Zetsche's success at Auburn Hills is attributed by many to such hit models as the Chrysler 300 and Dodge Charger, he and his team have been quietly grafting away on other aspects of the business. Plant productivity is improved, market share is increasing and relationships with suppliers are better than with Ford and GM. These are some of the basics on which Zetsche can deliver at Mercedes-Benz.
In his earlier days with the company Dieter Zetsche used to work in the high-rise headquarters of the historic Mercedes-Benz complex at Untertürkheim. I'd like to see him based there again instead of at the pretentious offices on the south side of Stuttgart at Möhringen that date from the expansionist Edzard Reuter era. In fact Möhringen, which Schrempp himself nicknamed 'Bullshit Castle', should be sold off. Car-company managers need to be close to their businesses. And it is as a car company that DaimlerChrysler will either fall or rise under its new management. I predict the latter.
- Karl Ludvigsen
Karl Ludvigsen is an award-winning author, historian and consultant who has worked in senior positions for GM, Fiat and Ford. In the 1980s and 1990s he ran the London-based motor-industry management consultancy, Ludvigsen Associates. He is currently an independent consultant and the author of more than three dozen books about cars and the motor industry, including Creating the Customer-Driven Car Company.