DaimlerChrysler suppliers say it's no accident that Juergen Schrempp's management legacy is under attack - not only in a US courtroom, but also in Germany in the form of a declining quality reputation for Mercedes-Benz. The suppliers say that since Schrempp took over at Daimler-Benz in 1996 Mercedes has lost its engineering focus and has placed a higher value on cost.

The old maxim that Mercedes over-engineers its vehicles is seldom heard these days.

Mercedes has fallen behind BMW for the first time in the latest member satisfaction survey by the ADAC-Automarxx, the largest German roadside organisation.

Mercedes-Benz drivers gave the company a score of 2.14 on their vehicle and workshop performance - compared with 1.59 for BMW and 1.18 for top-scoring Toyota. The survey uses the German school marking system: 1 is excellent, 5 is very poor.

Complaints about Mercedes-Benz quality are not new. At least since the introduction of the W190 in the early 1980s Mercedes Benz customers have periodically complained that the brand is not what it used to be.

The three-pointed star has been stretched to cover an ever wider range of products, from the family-oriented entry-level Vaneo econobox to the SLR McLaren supercar.

The early models of the W124 E-class ran into quality problems. The A-class tipped over without ESP.

But consumers forgave Mercedes. They had faith that the brand's core engineering values would enable the company to fix any teething problems and deliver cars that were more durable and reliable than its competitors. But that faith now seems to be ebbing.

Sales unaffected, so far

The problem is showing up in surveys, though not yet in sales. The E-class is on track for record volumes. But the luxury market around the world has been one of the best-performing sectors, and for the last several years Mercedes-Benz has under-performed compared with such rivals as BMW, Porsche and Lexus.

The problem appears to be more than just a matter of poor execution of innovations or a drift from the brand values in new models such as the A-class or M-class.

The problem is the product. Rusting doors in the E-class, poor corrosion resistance on the M-class; defective airbags on the C-, E- and S-class and poor reliability of the electronic content of the cars - particularly of the current E-class.

"Mercedes has an astonishingly large number of problems," says German consumer magazine AutoBild.

Mercedes-Benz's share of the German taxi market has fallen from 80% to 60% over the last few years according to the Financial Times Deutschland. That is significant because taxi drivers drive Mercedes not for the prestige but because they are more reliable and durable and have better resale prices than other brands.

In the United States, the resale value of Mercedes Benz has fallen from first to fourth in the Automotive Lease Guide rankings - a critical indicator for the brand.

What happened? Mercedes-Benz suppliers say that since Schrempp took over the car maker has lost its engineering focus and has placed a higher value on cost. The E-class was designed to come in 11% below the cost of the outgoing model - and is now throwing off 50% of the car division's profits, according to analysts.

The brand has reduced its over-engineering and delivered the profits with which to support its sister companies, Chrysler and Mitsubishi, in their time of need.

But even the strongest brands can fade when the value for money proposition that built them up is no longer supported by the products.

AutoBild summed up in its survey: "The legendary solidity of once upon a time is no more."

Mercedes-Benz needs to recover its core values if it is to retain its luxury brand premium in the long term.

SupplierBusiness.com