A falling star

December 13, 2006 by gbrown

Somebody stole the “star” from my Mercedes the other day. It cost 130 pounds to replace from the dealer. 30 pounds for the part, 100 pounds for the labour. It’s not a major problem in the grand scheme of things, it’s just another trip to the dealer.

I always thought that Mercedes would actually make more money if it adopted the business model of Hoover and other vacuum cleaners in the 80s – that is sell the cleaner cheap and make money from the dust bags.

As with mobile phones, Mercedes could give its cars away for free and make all the money from dealer commissions.

Why? Because the Mercedes Benz brand is a falling star. Some time ago, MBZ was widely considered to be the most reliable auto on the market. In fact, there are plenty of old C & E classes still running despite having done in excess of 150,000 miles.

And now? Well, we can’t blame everything on the Daimler-Chrysler merger, but the facts speak for themselves. In the latest Top Gear survey of UK motorists, Mercs ranked 13th in reliability, the lowest of all German manufacturers. So what has happened to Mercedes?

Joplin once sung “Oh Lord, won’t you buy me a Mercedes Benz”, but that was 40 years ago. In the 21st century, we are fortunate to be able the see a fascinating business case study play out. The answer lies in understanding how the Germans and Japanese approach the challenge of producing an automobile.

Germans always built better looking cars than the Japanese. Take one look at the 911 or the SL55 AMG. Few Japanese cars can match the style and elegance. However, few consumers want syle without reliability these days. The days when having a car that started every time was a sign of reliability are long gone.
The competitive landscape has moved on, but the German’s haven’t Take one look at the Top Gear survey and who ranks in the Top 5 most reliable manufacturers – the Japanese. With the exception of Daewoo (Korean), the most reliable manufacturers are all Japanese (Honda, Toyota, Mazda, Daewoo, Lexus). “German manufacturers, once the epitome of solid reliability, remain on the slide, although last year’s most dismal duffer, the moribund Mercedes M-Class, is displaced by no fewer than four fragile French marques.”

The auto industry is a particularly useful case study in generic business practice. There are few real innovations, few diversions from the received wisdom of what a car should be (they mostly have 4 wheels, one steering wheel and between 2 and 7 seats for example).
Most players are global and have access to the required economies of scale and economic resources. Competition, therefore, is about business processes and execution and nobody does that like the Japanese.

Because Mercedes Benz does not embody the spirit of Kaizen – the discipline of constant and never ending improvement that seeks to eradicate waste from production and faults from the final product, the manufacturer has been left behind in the 80s through the gradual compounding of daily improvement by Toyota, Honda et al.

And I’m not soapboxing because I had to fork out 130 pounds for a new “star”. It’s quite inconceivable that a modern car should rust these days, let alone a luxury brand such as the Mercedes S-Class. But it does, and the smaller picture of Mercedes does not bode well for the future.

In one year, I have had to replace the pulley, power steering pump, oil sump, keyless ignition, MAS filter and the steering rack due to “mechanical failure”. The upside of the story is the degree to constant improvement (or Kaizen) can impact our lives.

A 2% improvement a daily basis would result in a doubling of performance in only 36 days – 2% a month in 3 years.

Consider the fates of Mercedes vs Toyota or Honda over 2 decades given such metrics. Mercedes’ decline is vindication of our individual needs to improve, educate and expand our knowledge on a daily basis.

There are many rising stars in the game of business and globalization simply creates a significantly larger playing field. Success requires being one of them, because standing still means like my S-Class, within time you’ll be rusting on the dealer’s forecourt.