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Michael Bassermann.

Like many prominent executives, Michael Bassermann drives a Mercedes. Actually, it's a company car. If that sounds good, listen to this: His job allows him to drive a different car several times each month--always a new Mercedes.

Yet another flagrant example of corporate excess? Hardly. Bassermann is president and chief executive of Mercedes-Benz of North America--He oversees the 66.5 billion deutsche mark ($40.9 billion) German luxury automaker's sales in the U.S. and Canada, which represent about 10 percent to 15 percent of overall sales. For Bassermann, driving a Mercedes is basic market research, even if traveling the bouncy New York State Thruway to Mercedes' Montvale, NJ, headquarters is not quite the same as speeding along Germany's Autobahn. In fact, navigating rush-hour traffic brings this particular 57-year-old commuter closer to his customers in ways the open highway never could. If Bassermann arrives at work relatively unharried, presumably other Mercedes drivers are in similar shape.

Unscientific, to be sure, but a quick study that can be done on any weekday. Weekends are a different story. Bassermann's Mercedes is parked in his driveway. He often grabs the keys to the Jeep Wrangler his two college-age sons share and hits the road. This is market research, too, because Mercedes has come to understand that while its seemingly conservative customers will drive a leather-appointed $70,000 car to work, they climb into a $25,000 Jeep Grand Cherokee or Ford Explorer to play.

Until recently, Mercedes had not bothered to compete with these popular sport-utility vehicles, the auto industry's fastest growing segment. But when even its own executives are loosening up behind the wheel of an American-made, sporty four-wheel drive, perhaps it finally sensed an opportunity. Mercedes and other German automakers have been hurt in the U.S. as American car companies have polished their image, and Japanese competitors successfully have lured affluent buyers. Mercedes has been looking to make a statement, but how? Idling at this crossroads, Mercedes decided, after much debate, to go off-road.

In an important strategic shift, Mercedes will produce a sport-utility vehicle priced at $20,000 to $30,000, the lowest cost Mercedes in the U.S. market. The model will be built in a new U.S. assembly plant, a vote of confidence in American manufacturing and a counter to high German labor costs. Mercedes will spend $300 million to build its first U.S. auto factory, which could employ 1,500 workers and roll out product by 1997.

"Many of our traditional customers have a four-wheel drive in their garage," explains the German-born Bassermann, a career Mercedes employee who has been at his current job since July 1992 and actively has contributed to the new strategy. "So there's a natural potential for us to tap."

Bassermann is involved in a risky and adventuresome plan. The new model will go bumper-to-bumper with Chrysler's Jeep Grand Cherokee and the Explorer, not Britain's $40,000-plus Range Rover. Mercedes, in fact, already makes a sport-utility vehicle, a shoebox-shaped four-wheel drive called the Gelandewagen 300GE, which sells--not very well--in Europe and Japan. Bassermann points out that the American-built product, though still on the drawing board, will be designed specifically for the U.S. market. The new factory will assemble 60,000 sport-utility vehicles a year, but only about 20,000 will be sold in the U.S.; the rest are for export.

Mercedes could have put the plant anywhere in the world. By choosing to build in the U.S., Mercedes is taking advantage of the weak dollar, sheltering itself from currency risk, and betting it can recruit a skilled work force that will make a quality product at one-third the cost in Germany. The company's plant in Sindelfingen, Germany, for example, requires 15 worker-days to build one sedan, at a cost of $4,800 per unit. Mercedes says workers at its proposed U.S. plant will build a sport-utility vehicle in six worker-days, at $1,440 per unit.

Not incidentally, Mercedes also seems to want a litmus test for a newly completed corporate reorganization that has stripped away layers of bulky management. Building and operating a U.S. factory to exacting German standards will be no small feat. Success will require more communication and efficiency than Mercedes has demanded in the past.

Mercedes has not announced where it will locate the plant, but Bassermann might be taking frequent road trips to North Carolina, which is considered a front-runner. Mercedes is a subsidiary of Daimler-Benz AG, which owns three Freightliner heavy-truck assembly plants in North Carolina and a fourth plant in Portland, OR. A decision is expected within a few months. Bassermann isn't saying anything, except to concede that "the Carolinas seem to be very 'in' these days."

Especially for another well-known German automaker that is putting heavy pressure on Mercedes. Archrival Bayerische Motoren Werke AG is building an assembly plant in South Carolina that will open by 1995, a bold move that certainly spurred Mercedes to action. Last year, for the first time, BMW outsold Mercedes in the U.S. Although Mercedes sold almost 63,000 cars in the U.S. in 1992, a gain of 8.2 percent over 1991, BMW's U.S. sales last year jumped 23.5 percent, to nearly 65,000 cars.

Bassermann is maneuvering to recover the lead. In November, Mercedes will introduce a new entry-level series--the "C-Class"--to replace the best-selling 190E. The cars will be priced at about $30,000, roughly the same as the 190E. Bassermann says Mercedes also is developing a minivan and a "city car," a subcompact, two-door car that could cost only about $10,000. "I'm going to maintain and expand the position of Mercedes-Benz in this country, and I have all the tools for it," he claims. "We have it on the products side, we have it in the organization. With a little help from the economy, I think we will be able to succeed."
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Title Annotation:N.B.; President and CEO of Mercedes-Benz of North America
Author:Burton, Jonathan
Publication:Chief Executive (U.S.)
Date:Jul 1, 1993
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