Mercedes-Benz Will Bring Fuel-Efficient Models to U.S.

(MoneyWatch)  Mercedes-Benz is unlikely to bring its smallest and cheapest cars to the United States, other than the Smart car, which since January has been distributed separately in the U.S. market by the Penske Automotive Group However, Mercedes-Benz will offer more fuel-efficient diesel versions of several of its existing models in the United States starting in September. Beginning in early 2009, Mercedes-Benz will also offer hybrid versions of its S-Class flagship and its M-Class SUV.

Meanwhile, the company's U.S. subsidiary is also working on a $300 million upgrade of its U.S. dealerships with new standards for appearance and customer handling, which the company calls the Autohaus Initiative. Ernst Lieb, president and CEO of Mercedes-Benz USA LLC, based in Montvale, N.J. presented the company's plans at a May 15 meeting of the International Motor Press Association in New York. The following are edited excerpts from a question-and-answer session:

Tell us more about Autohaus. Is it strictly appearance, or is there more to it than that? It is an open environment, there are glass walls into the (service) shop, the customer can look into the shop and see what they're doing to your car. It builds trust for the technician. What we don't want is where the car disappears, and two hours later, "Here's your bill, and here's what we did to your car." In some states it's not possible, but in some states, you can even have it set up so that customers are walking through the service area. -- Not everybody wants it, but for sure, people with the high-performance models, like AMG (the Mercedes-Benz high-performance division), those customers really want it.

What about the dollar and the euro? The dollar's at $1.55 to the euro, something like that, what if goes to, say, $1.70? What will that do to Mercedes? For anybody who imports from the euro zone, it's a huge concern. We do have a plant here in the U.S. so we are naturally hedged to an extent. They are building in excess of 200,000 units a year (many of which are exported). But $1.70, $1.75 (per euro) would be painful. It's true we have had periods like this in the past, or in other markets, and I can only say that we are not here to optimize for the next six months, we're here for much longer than that, we will not do anything that will jeopardize the business in the long run.

Can you increase production (at the Mercedes-Benz plant) in Alabama? We can, but it's very limited. We can do only a little bit, and that's it. And the C-Class, for instance, is our biggest (-selling) model, and the C-Class cannot be built there.

What about the A-Class and the B-Class? (smaller cars that are offered in other global markets, but not the United States) Those are not cars we really consider suitable for the U.S. For the U.S., a Mercedes-Benz has to have a certain concept, a certain appearance. We do customer (research) clinics all the time, and those (cars) really do not add value for us. There are parts of Canada that are very European, and there those cars do quite well. (Earlier in his career, Lieb ran Mercedes-Benz Canada.)

Are your customers concerned about fuel economy? It is a huge concern on the customer side, it comes up in every customer forum -- If you get 80 to 100 customers in a room, for sure this is going to come up.