Taxi drivers in the home town of Mercedes are switching brands. Richard Milne reports on changed times in Stuttgart.
Visitors travelling by taxi to the DaimlerChrysler headquarters in Stuttgart used to have one choice of vehicle: Mercedes. The same was true throughout Germany. But on visits in the recent wintry months, the taxi rank has usually been headed by a Volkswagen, Opel or worst of all a Mazda.
Jürgen Geier, a Stuttgart taxi driver used to drive a Mercedes before switching to Audi. "Mercedes has really gone downhill in the past few years," he explains. "I have colleagues who had to take their cars to be repainted practically every week. They have got a lot of work to do to gain their reputation back."
This anecdotal evidence, albeit from the heaviest users and sharpest critics of cars, highlights the trouble in which Mercedes finds itself. Its reputation for quality lies in tatters as it has been forced to admit that its cars, once the industry standard for reliability, are prone to breakdown.
Last week the Mercedes Car Group, which includes the lossmaking Smart small-car brand, reported its worst quarterly profit for 13 years and admitted that this year might be even more challenging. It even suffered the ignominy of seeing its profits overtaken by Chrysler, the previously struggling US mass-market carmaker that merged with Daimler-Benz in 1998.
For Germany's taxi drivers, this comes as no surprise. "Opels [made by GM of the US] are half the price of Mercedes and the quality is now the same," says Anis Ahmad, a Frankfurt taxi driver with an Opel Zafira.
Another taxi driver, who drives a Mercedes from the 1990s, says: "This one is top class but, when I replace it, I won't buy Mercedes."
The German Taxi and Hire Car Association (BZP) says that Mercedes' proportion of new taxi sales has fallen since the turn of the century from 70 to 50 per cent.
Simultaneously, VW's market share has risen from a tiny proportion to more than 20 per cent and is expected to grow further when it reports figures next month. Opel has benefited from an aggressive push into the taxi business that included offering attractive financing deals.
"Quality at Mercedes played a role in this," says the BZP. "There were so many problems, particularly with new technology." Partly as a result of cramming so much gadgetry into its cars without checking whether it all functioned together, Mercedes has slipped in the past decade from first to 28th place in the respected JD Power reliability survey.
"We are seeing things that should not have been allowed to happen in terms of quality," says one London analyst. As a result, Mercedes' operating margin in the fourth quarter dropped to a miserly 0.16 per cent compared with one of about 7 per cent in the previous quarter for its great rival, BMW.
Daimler executives have tried to strike an upbeat note. Chief executive Jürgen Schrempp said last week that the situation would be under control within a year. Eckhard Cordes, the new head of Mercedes, claimed that the cars now leaving its factories were the best quality it had ever made. But analysts at Morgan Stanley estimate that resolving the issue, which Cordes inherited last year from Jürgen Hubbert, his predecessor, will cost €500m a year.
Most analysts expect the company to gain control of the situation eventually and regain some lost clients. Taxi drivers may be among the hardest to woo back.
Mercedes gained its dominant position thanks to the durability of its cars perhaps best displayed by a Greek taxi driver who clocked up 2.8m miles in his 240D model. But as the technology failings have piled up, so other reasons have helped erode Mercedes' market share for taxis - chief among them the poor domestic economic climate during which many drivers have seen their takings halve.
"Price, as ever, also had something to do with it," the BZP says. A €20,000 Opel Zafira or VW Touran, both of seating seven people, make more economic sense than a €40,000 Mercedes.
"Clients don't care and we can earn more [through the added space]," says Ahmad.
However, second-hand sales of older, more reliable Mercedes models are booming in the German taxi market, says BZP, with the overall result that 70 per cent of all taxis still bear the famous three-point star.