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Mercedes to delay U.S. launch of entry-level B-Class; currency, cost concerns cited

DIANA T. KURYLKO | Automotive News
Posted Date: 2/7/05

NEW ORLEANS -- Mercedes-Benz will delay the U.S. launch of the compact B-Class for at least a year because of currency and cost concerns.

It is the second U.S.-bound vehicle derailed because of profitability questions by the new Mercedes-Benz management team headed by CEO Eckhard Cordes. Cordes, who took the helm in October, also delayed development of the Smart ForMore small SUV.

The price-sensitive B-Class won't debut until late 2007 at the earliest; it was planned for November 2005. The car still is scheduled to go on sale in Europe this summer.

The B-Class was to be Mercedes-Benz's new entry-level vehicle in the United States, competing with upscale compact newcomers such as the Audi A3 and the BMW 1 Series.

The compact B-Class is a tall five-door hatchback based on the second-generation A-class subcompact car sold in Europe. Mercedes showed the B-Class concept car, called the Vision B, at the Detroit auto show in January.

Before its delay, executives had called it an important vehicle in Mercedes-Benz USA LLC's new push into SUVs and sport wagons. The B-Class is 168.1 inches long, about 10 inches shorter than the C-Class sedan.

Weak dollar

Paul Halata, CEO of Mercedes-Benz USA, confirmed the delay at the National Automobile Dealers Association convention last week but would not elaborate. An insider says the weak dollar is a major reason.

In a report on DaimlerChrysler AG, Morgan Stanley estimates that Mercedes-Benz's currency loss will be $782.3 million higher this year than in 2004. Mercedes-Benz also is spending heavily to improve quality - an estimated $651.9 million in 2005, according to the report.

The B-Class was to have a sticker price below that of the C230 Kompressor sport coupe, which sold for $26,570, including destination charges. Mercedes dropped the slow-moving C-Class hatchback at the end of 2004.

Halata says the delay doesn't mean the U.S. launch of the B-Class is canceled: "At the end of next year, we will have a decision on what timing will be right for us."

Too many launches
Halata says one reason for the B-Class delay is Mercedes' heavy U.S. launch schedule.

"Look at how many launches we have," he said. "For me and the company, this is something we have to be very sensitive to."

The new CLS four-door coupe went on sale in January. The replacement M-Class SUV debuts in April. The R-Class sport wagon - a larger version of the B-Class - comes in October. The G-Class, a new full-sized SUV, debuts in spring 2006.

Mercedes' Smart minicar brand had planned to introduce its ForMore SUV in the United States in September 2006. Cordes' team is weighing whether the ForMore should be built and whether the Smart brand will sell in the United States.

U.S. dealers learned of the B-Class delay at their NADA make meeting. Douglas Callahan, the dealer council chairman and owner of Helms Bros. Inc. in Bayside, N.Y., says dealers did not appear concerned.

"Dealers took it in stride," Callahan said. "There were no questions about it - I think because there are a lot of cars being launched this year."

There were questions about how the B-Class could be received, he said. "That's a new segment, and we don't know how it's going to work."
I never like it when luxury marquees try to put out cheap (well relatively) econo-hatches to appeal to the lower markets. I'm not crazy about the BMW 1-series, and i'm not crazy about this, and am indifferent to it being post-poned. I think moving down-market is always a bad thing for luxury/image brands like BMW and Benz because people tend to buy them as status symbols in most cases. The base cars should be the 3-series and C-class (excluding cheaper hatch versions).
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