25 February 2005

Mercedes’ profits collapsed to just £12m in the final three months of 2004, the lowest level in the past decade, according to financial reports. City analysts fear that the once-bullet proof brand could actually swing into loss in the first part of 2005.

Mercedes is now paying the price, say commentators, for a decline in quality and reliability. The brand abandoned no-compromise engineering in the early 1990s as company chiefs embarked on a massive expansion of the model range that now stretches from the A-class to the Maybach limo. The firm is also struggling with Smart, which is still running up substantial losses. Eckhard Cordes, boss of Mercedes’ automotive division, has insisted that the firm’s problems were mostly electrical, rather than more fundamental engineering problems. It’s widely believed the maker has been damaged by vehicles such as the M-class off-roader and the previous-generation E-class, which have gained a reputation for unreliability. Sales have been sliding recently, although 2005 and 2006 will see a burst of new models, including the R-class, M-class and new S-class.

Mercedes has also registered the GLK name, which is expected to feature on a BMW X3 rival based on the 4wd C-class.

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