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22.03.2004. Maybach Learning Some Costly Lessons
Slow start leads DaimlerChrysler division to rethink long-term strategy.
by Paul A. Eisenstein
Life's little lessons can be costly - especially when you're launching a new brand into one of the most rarified segments of the automotive market.
DaimlerChrysler's new Maybach marque has gotten off to a slower than expected start due to skeptical buyers and a global economic malaise. That has forced the automaker to rethink its strategy for the high-line brand, starting with its sales forecast, company officials concede. But they stress that DaimlerChrysler remains committed to the Maybach project.
"We have had to learn several lessons" since Maybach launched last year, Leon Hustinx, director of Maybach sales and marketing operations, acknowledged during an interview with TheCarConnection.com.
In all, Maybach delivered about 600 cars worldwide during 2003, Hustinx revealed. While he agreed that was short of the target, he declined to say by precisely how much. Longer term, Maybach had intended to sell a minimum of 1000 cars a year at prices running north of $300,000 apiece.
Now, said Hustinx, "I don't think 1000 is realistic."
The shortfall reflects a slow launch, especially in the critical U.S. market, which is expected to provide the lion's share of customers for Maybach's two models, the M57 and M62 sedans.
Several factors contributed to the rollout delays, including quality problems with suppliers providing the high-line woods and leathers used to cocoon Maybach's affluent and demanding passengers.
"With a luxury brand," said Hustinx, "you can't take shortcuts." The DCX division was forced to switch some of its supplier "partners," delaying production. "It has taken us about a year to get things right," the Maybach executive revealed.
Back at the top?
The Maybach project dates back to the late 1990s, when DaimlerChrysler began exploring the idea of competing with the likes of Rolls-Royce and Bentley. It decided not to push the Mercedes-Benz brand upmarket, opting instead to create an entirely new nameplate - or, more precisely, reviving an old one.
The new brand takes its name from Wilhelm Maybach, the first chief engineer for Gottlieb Daimler, one of the founders of what later became Daimler-Benz and now DaimlerChrysler. Eventually, Maybach formed his own auto company, and from 1921 to 1941 produced about 1800 luxury cars, some of the most lavish and technically sophisticated of their era.
The automaker hoped to reclaim some of that past glory, but it hasn't proved as easy as first thought. "If you have a brand with 60 years missing, it takes time to reposition it," conceded Hustinx, adding that "Outside Germany, people didn't know the brand."
Maybach's heritage "doesn't really mean anything in the modern world," echoed Dr. David Cole, director of the Center for Automotive Research, in Ann Arbor, Mich. He believes Maybach's problems are compounded by a variety of factors.
The Maybach project was first conceived during the boom years, when the worldwide ranks of the super-rich mushroomed. But that was before the dot-com-bust, stock market slump and a general economic malaise struck most of the world's major markets.
Compounding the situation, a variety of other manufacturers decided to go after the same market. No longer partnered, Rolls and Bentley have launched new products and raised their sales targets. Ford Motor Co.'s Aston Martin set out a fivefold growth plan. And other high-line players, such as Lamborghini and Bugatti, also took aim.
All told, the various entrants would need to sell nearly 20,000 vehicles a year priced above $150,000 to meet their targets. While less than 0.1 percent of the total global automotive market, that's still nearly three times the segment's previous record.
Some are succeeding. Ferrari has waiting lists of two years or more, and Lamborghini is struggling to meet demand for its Murcielago and Gallardo models.
But high-line sports cars, such as the new Ferrari 612 Scaglietti, appeal to those "used to glitz and flash and who enjoy showing off," said Cole, while stately vehicles, such as the huge Maybach M62 "are driven by fairly conservative people." And such buyers seem increasingly reluctant to flash their wealth, suggested Cole, "because of concerns about crime and terrorism."
Many potential buyers also prefer not to stand out, particularly in socially conscious Europe, where buyers often remove the badges from high-line products such as the Mercedes S-Class. "People say they would love to drive our cars but can't," said Hustinx, "because of jealousy and envy."
A different world
While the marketing chief acknowledged that "the world is different from what it was" when Maybach was conceived, he and other company officials remain confident their new brand will eventually succeed. They're refining marketing techniques, focusing on building "relationships," rather than using traditional advertising tools, explained Hustinx.
Maybach stages a variety of entertainment events and other gatherings for owners and solid prospects, hoping to build networks through word-of-mouth. "You have to find your customers, and if they're happy, they'll bring you your next buyers," explained Hustinx.
Maybach is beginning to attract some high-profile customers, he hinted, in the Mideast, as well as in the entertainment world. Hustinx declined to provide names, though its been reported that actor/director Clint Eastwood was seriously interested in Maybach. And singer Alicia Keys is one of those who signed the guestbook at the Maybach factory near Stuttgart, a facility often visited by buyers.
To expand Maybach's appeal, there's been talk of adding a third model, perhaps to compete with Bentley's $150,000 Continental GT sports car. But for now, any such project is on hold, said Hustinx, noting, "The board tells me first make money and then we talk again."
Hustinx insists that by the end of the first ten-year product cycle, there'll be a "black zero" - break-even - on Maybach's bottom line. And by the "beginning of the second ten-year cycle, we'll make money."
There are plenty of skeptics, however, and even the more bullish observers warn there may still be more changes needed to make the Maybach strategy work.
www.thecarconnection.com