Mercedes-Benz AG desperately needs to reinvent itself and Wolfgang Bernhard may be just the man to do it.

The 43-year-old Chrysler COO was named head of Mercedes-Benz last week. He must now achieve in Europe what he has attempted to do at Chrysler over the past three years – vastly improve product engineering and quality.

Though still a great premium brand, the three-pointed star has been badly tarnished during the past decade. Quality has declined at the same time that Mercedes has rushed into several new and cheaper segments. It was too much for the brand to bear.

Bernhard replaces Jürgen Hubbert, who has controlled Mercedes passenger-car operations since the late 1980s. The 64-year-old executive is a legendary figure, but it is time for a change.

Hubbert started his career by fixing the damage done by an overweight and over-engineered S-class. But engineering excellence has suffered in recent years.

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Bernhard is a product-passionate executive who has been accused of trying to make Chrysler’s American cars too Mercedes-like.

He did succeed in America as a cost-cutter. But to do it he unwound the industry-leading supplier relations Chrysler enjoyed in America. Tom Stallkamp’s SCORE program of cost and innovation sharing with suppliers is long gone. Bernhard will need to handle the core Mercedes-Benz supplier base differently than he has Chrysler suppliers.

Weakened brand

After a decade of tremendous growth the relative position of the Mercedes brand has weakened. Now it has a middle-of-the-pack ranking among luxury marques.

In a recent poll, readers of the German car magazine auto motor + sport judged Mercedes Benz fourth in quality after Lexus, Audi and BMW.

The survey is an important barometer of prestige. It suggests that the brand premium Mercedes Benz can charge in the long run is under pressure as a result of poor reliability.

Auto motor + sport readers also say not every Mercedes is equipped with the latest technology. And the brand scores lowest among drivers behind Lexus, Audi, BMW and Jaguar. Among the luxury brands it scored well behind Jaguar on the question: “Do you like your brand?”

The new A-class, due for launch in autumn 2004, will be a critical test. Mercedes Benz got the first A-class wrong. It built a car that didn’t live up to brand values, and has damaged the Mercedes image.

With the Mini, BMW has proved in fact that a premium pricing position is viable even in a small car segment. But the vehicle has to be done right.

The wobbling of Volkswagen Golf’s dominant high quality entrant in the lower medium car segment in Europe is a critical opportunity for Mercedes-Benz.

Mercedes needs to rediscover quality. It needs to put something extra back into the brand – give consumers more than they expect. But to succeed Bernhard needs to start reconnecting with the supplier base.