A-Class to Zetsche: Mercedes’ priority list

  • 23-Aug-2012 08:30 EDT
Merc8-12Zetsche 1.jpg

Dr. Dieter Zetsche is confident that the Daimler Group's R&D spend—€5.6 billion last year—is sufficient to counter rivals' technology advances.

Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, is blunt and brief on the subject of how his company will tackle the ever more challenging difficulties of emissions reduction: “With a lot of technology—and a lot of technology which is costly!”

Important though it is, the vexing subject of emissions is just one of the diverse areas of technology that any OEM and supplier must embrace and master. And most of that, too, is very, very costly.

In the world of industrial automotive might, Mercedes may be a major player but increasingly it faces the threat or actuality of rivals expanding to massive proportions—with equally massive R&D capabilities. The overarching European example is the Volkswagen Group, now with Porsche’s capability to add to its plethora of brands with the ability to cross-link on everything from powertrains to pedals.

Can Mercedes keep up with the R&D power of VW, Toyota, and General Motors? Zetsche is coolly confident that it can—and will: “As a Group (Daimler), we had €106 billion in revenues in 2011 and as a proportion we run R&D at 5%-plus of that (€5.6 billion), with Mercedes’ Cars accounting for €3.73 billion," he told AEI. "I do not know of any car company, whatever their sales volume, that would compare favorably with such high figures!

“It doesn’t matter if a company sells three times as many small cars as another; it matters what kind of revenues you generate. We are second to none as far as our technological resources and capabilities are concerned.”

But with the arrival of the latest compact A-Class and B-Class ranges, Mercedes itself is arguably in that small-car sector. “We have to make sure that the smaller cars are more profitable than they used to be,” he stressed.

Zetsche stated that the new A-Class would achieve significantly higher volume than the previous model, a broad product mix, and would be built in three centers—Germany, Hungary, and Finland—to achieve lower labor costs on average. He is convinced that Mercedes will have top profitability in the segment.

The overall volume of cars with a Mercedes badge in the compact sector? “We have a cash commitment to more than 400,000 units, and we are investigating production in China,” he said.

While some companies are considering more shuttering of factories, the bullish Zetsche (an electrical engineer whose career is founded on R&D and who has been running Daimler since January 2006), said: “We are looking for ways and means to expand the production capability we have at Rastatt and Kecskemét.” The A-Class will also be assembled by Valmet in Finland.

However good prospects may look, pan-industry technology and commercial cooperation are an increasingly rational course. Mercedes has a close relationship with the Renault-Nissan Alliance, and Nissan’s Decherd, TN, plant will build Mercedes four-cylinder engines for Infiniti and Mercedes from 2014. Installed capacity is 250,000 units per annum, and the facility includes crankshaft forging and cylinder block casting operations. It will be a major source of supply and logistics for Mercedes’ Tuscaloosa, AL, plant. Zetsche confirmed that Mercedes is discussing what he refers to as “quite a number of other very promising” potential cooperations but says that it is essential not to get “too collaborated.”

Maintaining focus on product progress and identity sees Zetsche spending at least an hour every week in his company’s design studios: “I see every car from the first drawing to the final styling freeze—and I get involved.”

He is also pushing his R&D specialists (there are 15,600 in Mercedes alone; 23,200 in the Daimler Group) to follow his own and the Board’s vision of emissions- and accident-free driving, both of which represent high-level technology directions. Other technology priorities are the emerging markets’ needs, being green, and being "digitalized." The latter concerns a whole gamut of areas including mobility concepts, connectivity between customer and car, and car to car.

Autonomous driving he regards as not being a big deal technologically, but legal aspects are a concern: “You prevent 99 accidents happening, but one occurs when a vehicle is being driven autonomously and you may get into deep trouble with just that one. Our general philosophy is that we want to keep the driver in control; to build a safety net around the driver so that he or she does not pay for any wrong decisions. But that doesn’t say that, in stop-go traffic, a driver can’t read a book.”

What worries Zetsche, though, is the threat of hackers intervening with the operation of autonomous cars: “These are nasty scenarios. And you can also think about governments regulating whatever they want—speeds limits and even levels of acceleration. We don’t like this prospect. So we are not striving for an entirely autonomous car.”

An on-going technology issue is the fuel cell. Zetsche is a believer in it, and the new B-Class with a half-sandwich floor and energy storage area was designed to take the system or other electric solutions. “Technically, I think we’re there. We can now offer a car to a customer that is reliable and that has similar characteristics to a combustion engine vehicle—and that can be enjoyed. Cost wise, though, we are not there. But I believe in 3-5 years, fuel-cell cars will be in showrooms to be bought.”

Meanwhile, improvements in combustion-engine design are very much in the frame, including some technology that has been seen in the concept DiesOtto engine—notably variable compression ratios. The engine demonstrates the convergence of diesel and gasoline technologies.

The various curves of diesel and gasoline performance are closing or crossing. Emissions legislation is now making diesel engines very expensive items, said Zetsche. The minimum number of cylinders is likely to be four.

As boss of one of the most technology-led auto companies in the world, Zetsche’s response to the question of the importance of an engineer running it is again blunt and brief: “It’s not a must—but neither can it hurt!”

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