Daimler sees new compact cars, S-class limo lifting performance

Fri Feb 7, 2014 10:58am EST
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FRANKFURT (Reuters) - Daimler (DAIGn.DE: Quote) is relying on new compact cars and its S-Class limousine to bring a step change in productivity and pricing, and to fix its China business, Chief Executive Dieter Zetsche said on Friday.

The maker of luxury limousines, offroaders and hatchbacks is aiming to raise the average return on sales at Mercedes-Benz Cars to 10 percent, from 6.5 percent in 2013 and 8 percent in the fourth quarter, to close the profitability gap with rivals.

The launch of a rejuvenated range of models including a C-Class sedan, the CLA compact coupe, the A and B-Class compact hatchbacks and the top-of-the line S-class limousine puts Daimler in a sweet spot to raise profitability, Zetsche said.

"The overall target of 10 percent means more in good times, we are well on our way to hitting these targets," Zetsche told analysts, referring to a "medium-term" target.

BMW and Audi, both of which have yet to publish full-year results, last reported a quarterly automotive operating margin of 9 and 9.4 percent respectively.

Profits will rise with the rollout of new cars that use a high proportion of common parts thanks to Daimler's modular front-wheel drive architecture and its new its rear-wheel-drive architecture.

"The main thrust definitely is product," Zetsche said, noting that Mercedes is about to launch the C-Class midsize premium car, its biggest volume selling model, using the rear-wheel drive architecture.

This will allow Daimler to reduce production costs per model by a double digit percentage amount, and to increase the speed of production, Zetsche said.

Production of the C-Class has started at Daimler's plant in Bremen, Germany and will be expanded to factories in China, South Africa, and the United States in what amounts to the most ambitious product rollout in Daimler's history.   Continued...

Chairman of Daimler AG and Head of Mercedes-Benz cars Dieter Zetsche speaks during the press preview day of the North American International Auto Show in Detroit, Michigan January 13, 2014. REUTERS/Joshua Lott