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Mercedes Pumps $1.4 Billion Into Dealership Makeovers

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On: Wed, Feb 9, 2011 at 1:02PM | By: Sherry Christiansen


Mercedes Pumps  $1.4 Billion  Into Dealership Makeovers

Every week, millions of TV viewers tune into “Extreme Make-over: Home Edition” to see old homes demolished and new homes rise from the rubble. Although not as drastic as that show, Mercedes-Benz has caught the makeover bug. The company is pumping around $1.6 billion into refurbishing its American dealerships in the hopes of bringing in younger buyers.

There are around 300 Mercedes dealerships that are updating showrooms. This comes on the eve of the delivery of the refreshed C-Class Sedan. In the world of luxury sedans, Mercedes and BMW have managed to take home only the silver and bronze medals against Toyota’s Lexus. Now that sales gap is closing and Mercedes is sprucing up to get ready.

“The first step is to update our facilities, and now we're working with the dealer body on having the sales force ready to sell the new products coming to showrooms,” said Ernst Lieb, president of Mercedes-Benz’s U.S. operations. He’ll be meeting with auto dealers later this week at the National Automobile Dealers Association’s annual convention in San Francisco. Lieb said that the goal for Mercedes is to increase sales by over 10% for 2011 on other new models, like their highly anticipated SLK roadster and M-Class SUV.

What’s the reaction from the dealers on the front line? Randy Berlin is an auto dealership consultant for Urban Science. In a recent interview, Berlin got to the heart of the matter. “That is a substantial investment. The approximate $5-million-per-dealership renovation Mercedes is making would be about half the cost of what is spent to build new stores in some markets. Mercedes dealers have to be confident that they're going to get a good return on the investment,” Berlin said. “For them to commit $1.4 billion to upgrade their facilities, they must know there's going to be a pot of gold at the end of the rainbow to recoup that money,” he said.

Back to Mr. Lieb for the big pitch: “When you look at our lineup today, at the low end of the luxury market, what do we have? We have a C-Class four-door sedan, with two engine variations, and that's it. Any one of our competitors are very rich in that segment with coupes, convertibles, and other variations and different engines.”

The question then becomes, does Mercedes have the sales numbers to back up this spending splurge? Apparently they do. Mercedes U.S. sales rose 11% in January, from a year earlier, to 16,398 units sold.




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