Re: MB reliability


DAS: That's my point, not a brand problem, but your previous statement
implied it was. (Or I, perhaps erroneously, inferred it was...)

H: You erroneously inferred that it was. I was trying to move on to
another topic because the whole brand debasement thing is not actually
a problem from a business sense. It is a problem for the consumer since
it creates a lower quality product, but for the business it is good. It
is a way of unlocking short term value. The problem for Mercedes is the
cost of production of the vehicle, which for them is too expensive, and
I beleive that that is because of labor costs which are much higher
than other industrialized nations. Compared to the US, Mercedes pays
30% more for the same work in Germany than in the US even when they are
paying the same actual wage to the employee because of the cost of
health care, vacation, and labor based taxes. Mercedes chooses to pay
nearly twice what the same US UAW labor makes so they could still get
the same labor for less.

DAS: Not sure what you mean here, exactly. 'Western' labour is generally
high-cost on an hourly basis. I don't think the differences between Germany
and other similar places are that significant in the final selling price of
a motor car. What matters more is the efficiency of utilisation, obviously.
This includes on-costs and degress of flexibility or labour.

H: I disagree. The hourly rate of a laborer can be the tipping point to
unprofitability when margins are thin and competition keeps driving
selling prices down. Yes, a plant which is inefficient in the way that
it manufactures will never compete in a global arena in which
manufacturing processes are similar. More expensive labor markets use
more robots and fewer people to keep costs down, which again may lower
quality if those robots are ill equipped for the tasks which they must
perform. Of course the great example of an inefficient plant which
could never compete on the open market was the Rover plant in
Birmingham, which didn't even use a stuff up. No manufacturer could
have made that plant competitve.


DAS: I am reminded of an exchange during a Stuttgart factory tour in the
mid-eightes, when Merc did not produce abroad. Among the visitors (mostly
people who had come to collect their cars personally) and the guide there
was a discussion about German labour quality when it was pointed out the
majority of the 40-odd-thousand workforce was of Turkish origin...

H: It's a point.


If product quality in a poor country rises the cost will also rise, maybe
not quite to 'western' standards, but in same ballpark. An excellent
example in my mind is Japan and its development from 1945 to now.

Yes. This is also true for Germany who was equally poor after World War
two, but the dynamics of this change come from an influx of wealth into
the economy from sales both domestic and foriegn, which raise the

DAS: My point was that in my early youth (fifities and sixties) "Made in
Japan" was a byword for 'cheap and nasty'. "Made in Germany" never had that
connotation. West Germany was temporarily and briefly poor due to war
devastation, but started a rapid economic ascent as soon as the new, freed
currency (Deutsche mark) was introduced in 1948. Products made in Germany
never had a bad reputation for quality.

H: I got your point, but I didn't particularly agree with it. It isn't
the raising of the inate "quality" of the product that makes the cost
of production more expensive. It is the increase in wealth due to
increased sales that makes an economy inflate. That raises the wealth
of an area and the costs of good made there. The finest good in the
world can be made in a place which is cheap and the increase in its
inate quality is great, but if it does not sell then there is no
increase in wealth and no inflation.


I know that Mercedes says that the source of its problems come from new
technology in their cars, but that isn't the whole story. If one starts
to look at the parts that Mercedes has been putting in their cars for
the past fifteen years everything including the window switches have
been reengineered with an eye towards cost instead of quality.

The classic example mentioned was the ashtray cover, which was damped and
had this really expensive feel when opened and closed. The damping was
removed on cost grounds, though I think Merc realised this was a step too
far and reinstated it.

H: The ashtray cover doesn't really work as an example since 1) it
won't "fail", it will only feel cheaper than the old one (personally, I
really hated the change to Japanese style door lock plungers instead of
the old silver tipped black ones, which spoke Mercedes to me. They
reinstated those as well.) and 2) when we are discussing quality, I
bring up the cam shaft thing since that cost a friend of mine around
three thousand dollars when his oiler caps failed. As a matter of brand
debasement, the ashtray cover is an excellent example, but it is not a
quality problem.


The question that interests me (unanswerable) is what would have happened if
Merc Cars had continued on the path of exclusivity and long delivery times,
whilst remaining focussed on quality (already-mentioned past problems
notwithstanding) irrespective of pricing. Smaller and more profitable? Or
declining? Or maybe a niche division of VW or GM? Or bigger than now?

H: That is an interesting question, and it is unanswerable. I think
that the company would be in much, much worse financial shape than it
is now, but I think that I would have made my last car a Mercedes
(assuming it was still in business) than the Mazda that I did buy. The
Mazda has all the luxury goods in it that I want without the
goo-gawery, and it works much better than a new Mercedes for half the
price. Mercedes to me is my '72, and if I had one, the greatest
Mercedes of all time in my opinion, a 1980 300SD. Those cars were tanks
and drove like tanks. The choices that Mercedes have made in the past
fifteen years concentrating on gadgetry to sell cars and cheapening the
actual assembly of the car has turned them into a 1974 Cadillac to me,
and that is a very, very bad thing.

.

Relevant Pages

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