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Posted 7/29/2006 4:55 PM

Wolfgang

Date registered: Dec 1899
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Tuscaloosanews article

http://www.tuscaloosanews.com/apps/pbcs.dll/article?AID=/20060729/N...

Daimler profits boosted by Vance plant

By April Wortham
Staff Writer
July 29. 2006 3:30AM

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The M-Class Mercedes sits in the lot at Leigh Mercedes Benz on Skyland Boulevard on Friday.
Staff photo | Michelle Williams

Big, fuel-hungry vehicles may be dragging down profits at Chrysler, but the three SUVs produced in Vance haven’t hampered the Mercedes Car Group or hurt overall profitability at DaimlerChrysler AG.

In fact, some say the M-Class, R-Class and new GL-Class are a large part of Mercedes’ and its parent company’s current success.

Upon the release Thursday of its quarterly earnings report, DaimlerChrysler pointed to its Mercedes unit for helping to more than double the U.S.-German automaker’s profits in its second quarter.

DaimlerChrysler posted a net income of more $2.3 billion, up from $939 million for the same period in 2005. That’s despite a 91 percent drop in profits within the Chrysler Group. Helping push DaimlerChrysler into the black was the Mercedes group, whose operating profit rose from $15 million to $1 billion.

“The increase was caused by the division’s higher unit sales, and an improved model mix, due to the full availability of the new S-Class and the M-/R-Class," the company said in a statement.

Lindsay Chappell, mid-South bureau chief for Automotive News, said that while sales of heavy, full-sized trucks and SUVs have slumped industry-wide, those produced at Mercedes-Benz U.S. International in Vance are performing relatively well.

“Mercedes gets a little break because they’re in a segment within a segment, of luxury class vehicles. If the average consumer is backing away from an average-priced SUV, the luxury buyer is probably backing away a little less so," Chappell said.

Mercedes sold 2,601 units of the M-Class in June, down 26 percent from a year ago, when the company was two months into the launch of the second-generation M-Class. However, year-to-date sales of the M-Class remained steady, with 14,326 vehicles sold in 2006 so far.

Since going on sale in late April, the full-sized GL-Class has sold 5,245 units, 2,201 of those in June. Year-to-date sales of the R-Class, which hit dealerships in October, were 9,672 units, including 1,445 last month.

Mercedes’ U.S. sales figures for July will be released Tuesday.

Jesse Toprak, executive director of industry analysis for Edmunds.com, said Mercedes’ vehicles are highly profitable to begin with, and with the R-Class and GL-Class now online, volumes also are up.

“There’s a general weakness in the market for SUVs to begin with; however I will say that the luxury SUV segment has been mostly stable, so it hasn’t been that bad," he said.

Toprak said that the M-Class made up 12.5 percent of Mercedes’ U.S. sales in June, down from 19 percent for the same month last year. And while volumes are down, incentive spending is way up.

Last June, Mercedes spent $253 per M-Class in incentives. That figure has gone up tenfold to $2,516 per M-Class last month, he said.

“They’re spending more money to sell the same amount of vehicles," he said.

Despite this and the nearly $10,000 per vehicle being offered on the R-Class Grand Sports Tourer, Mercedes as a whole is still below the $2,945-per-vehicle industry average for incentive spending, he said.

Mercedes SUVs continue to be popular, even compared against others in the luxury segment. Base-to-turn, a measure of how many days it takes a dealer to sell a vehicle after it is delivered, is 38 days for Mercedes’ vehicles compared to 52 days for other luxury SUVs, Toprak said.

A lot of that is credited to the new GL, he said. Mercedes’ first and only full-sized passenger SUV sold 2,201 units in June, bringing the total number of units sold since the end of April to 5,245. That’s with virtually no incentives.

The GL-Class will be launched in Europe in September, about the same time diesel versions of the M-Class and R-Class will be available in the United States.

Greg Peeples, general man-ager of Leigh Automotive on Skyland Boulevard, said he sold three GL-Class models on Friday and would have sold more had there been any in stock.

Combined with the M-Class and R-Class, the trio of SUVs accounted for 60 percent of his Mercedes sales in the last month, Peeples said.

“Actually, I think they’re playing a big part in the profitability. There’s been a lot of excitement over the new GL and the M-Class is doing really well. The R-Class is starting to pick up, too," he said.

Mercedes does not release sales targets for its vehicles, but Toprak said he thinks Mercedes would be doing well to sell 20,000 units of the R-Class this year. The 9,672 units sold since January puts them close to that goal.

“They might be just a tad under where they want to be for the year, but it’s not been a bad performance," he said.

Linda Sewell, spokeswoman for the MBUSI plant in Vance, said the U.S. sales figures are just part of the picture. The three vehicles assembled at the plant are shipped to 135 countries worldwide, she said.

“The M-Class and the GL are really strong actually worldwide," she said. “They’re in very strong demand. And of course the R-Class is holding its own, but it’s a new concept."

Reach April Wortham at april.wortham@tuscaloosanews.com or 205-722-0213.

Edited by Wolfgang 7/29/2006 4:56 PM

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