CORE focus fuels Mercedes bottom line

Mercedes is getting better mileage on its results through its CORE program, which focuses on all aspects of manufacturing, and critically the supplier network.
The returns can be seen in the DaimlerChrysler first quarter results for 2007. While unit sales dropped by five per cent, earnings before interest and taxes (EBIT), was up from the previous year’s Euro 1.2 billion to nearly Euro 2 billion.

A major contributor was the Mercedes Car Group’s sales growth of one per cent over last year. “This was partially due to an improved model mix, resulting from increased unit sales of the S-Class, E-Class and the M-/R-/GL-/G-Class. In addition, the cost efficiency of the Mercedes Car Group was further improved by the implementation of the CORE program,” says a company statement. In the first quarter of 2007, several thousand changes were made along the entire value chain through the CORE program.
Chrysler – now controlled by the Cerberus Group – will continue to benefit from programs like CORE. Announcing the purchase, the two companies said “existing projects with the Mercedes Car Group will be continued, for example in the development of conventional and alternative drive systems, purchasing, and sales and financial services outside the NAFTA region.”

Frank W. Deiss, Vice President Procurement Mercedes Car Group and Vans, added “Chrysler today is structurally more sound than its North American based competitors. And with Cerberus as a partner, Chrysler will have the best chances of utilizing its full potential. We very much look forward to our continued cooperation as business partners, as we want to continue to reap the mutual benefits of working together. That’s one of the reasons why we’re retaining a 19.9 percent equity position in Chrysler,” he said.

“We would like to thank DaimlerChrysler for their good stewardship of this American icon over the last decade. We are aware that Chrysler faces significant challenges, but we are confident that they can and will be overcome. A private investment firm like Cerberus will provide management with the opportunity to focus on their long-term plans rather than the pressures of short-term earnings expectations,” continued Snow.

Turning to plans for the Daimler Group that controls the Mercedes marque, Zeiss said “We have a strong starting position. We have an above-average financial power. And our future prospects are promising. We will be the leading manufacturer of premium products and a provider of premium services in every market segment we serve worldwide. And we will pursue our commitment to excellence based on a common culture, a great heritage of innovation and pioneering achievements and – with Mercedes-Benz – the strongest automotive brand in the world.

Projections by Daimler Group

The Mercedes Car Group will generate a return on sales of at least 7 percent this year, with higher rates to follow in the coming years.

The Truck Group will achieve an average return on sales of 7 percent over the cycle as of 2008. This represents a return on net assets of approximately 30 percent.
DaimlerChrysler is also a world leader and profitability benchmark for buses. And in the vans business, which is performing very well, the new Sprinter will continue the success story of its predecessor.
The Financial Services division aims to earn a return on equity of more than 14 percent.