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Daimler unveils make-or-break S-Class flagship

Two new Daimler S-Class cars (front) are displayed during a presentation at the Airbus plant in Hamburg, May 15, 2013. REUTERS/Fabian Bimmer
Two new Daimler S-Class cars (front) are displayed during a presentation at the Airbus plant in Hamburg, May 15, 2013. REUTERS/Fabian Bimmer

By Christiaan Hetzner

HAMBURG (Reuters) - Germany's Daimler pulled the covers off its new flagship Mercedes-Benz S-Class luxury saloon on Wednesday, a critical product launch for a company struggling to make a dent in the lead that rivals BMW and Audi enjoy in sales and profit.

Hosting over 500 international journalists in the cavernous halls of an Airbus jet plant in Hamburg and flanked by Alicia Keyes and the city's symphony orchestra, Chief Executive Dieter Zetsche revealed the first glimpses of a Mercedes that for decades has served the well-heeled.

"Image-wise the S-Class is the vehicle that most personifies Mercedes-Benz. If they get it wrong, it could damage the brand and all the vehicles under it," said Christoph Stuermer, research director at IHS Automotive in Frankfurt.

"Three generations ago (in 1991) they screwed up the S-Class and it nearly put the company on the brink, that's how important a role it plays."

The sixth-generation limousine, which was last reborn eight years ago, starts at nearly 72,000 euros ($92,600) with tax and boasts the highest levels of comfort, including air purifiers for customers in China, the car's biggest market.

Weighing up to 100 kilograms less than the previous model and boasting the lowest drag resistance in its class, noise and vibrations are harder than ever to perceive for a passenger. Particularly if they're enjoying the fully reclining seats, which massage the back using hot stones.

The S-Class has traditionally served as the showcase for Daimler's latest technology, including safety features that Mercedes helped pioneer. The S-Class in 1978 was the first car in the world to offer anti-lock brakes, for example.

Daimler has already pledged the 6D technology dubbed "Intelligent Drive" will come standard on the new S-Class. This employs a battery of sensors, a stereo camera and a proprietary algorithm to lend the vehicle "eyes" that cover 360 degrees and automatically adjust handling to the street surface.

"As if you are on a flying carpet," Mercedes sales chief Joachim Schmidt told reporters.

Analysts estimate such features help Mercedes easily make double-digit returns on each S-Class sold, though the true figure is a closely guarded secret.

"We invested massively in the new S-Class ... more Mercedes than an S-Class isn't possible," Zetsche told reporters, adding over 500,000 of the last generation were sold.

UNMET PROMISES

Zetsche drove home how closely the future of the group is linked to the car early last month when he told shareholders that "we strive to be a sustainably competitive company that not only produces the S-Class, but which is the S-Class".

He has only a three and half years left on his contract, and were he to quit now he would leave a legacy marred by unmet promises and constant profit warnings that contrasted starkly with record earnings at his rivals.

While Mercedes achieved an operating margin of 7.1 percent last year, BMW notched up 10.9 percent and Audi 11 percent.

In October, Zetsche scrapped mid-term margin targets that were supposed to be achieved in 2013, and last month said his revised full-year guidance from February would also not be met.

Zetsche is banking on an outright success for the S-Class in order to retake the crown as the world's largest premium carmaker by 2020 as planned.

He does have some reason to be optimistic; though the Mercedes brand continues to lose ground to rivals BMW and Audi in terms of sales volumes and profitability, the S-Class remained the leader in the luxury limousine segment in 2012 for the eighth year in a row despite the impending model changeover.

The car will take on an even more important role now that it will also replace Daimler's failed Maybach ultra luxury brand at top of the company's pyramid.

Zetsche revealed in November 2011 that the Maybach brand would be once more consigned to the dustbin of history in favor of new S-Class body styles, which are set to grow to six with the new generation from the current saloon, stretch and coupe versions.

A larger and longer S-Class, widely expected to be dubbed "Pullman", will compete head on with Rolls-Royce and Bentley for the hearts of the super rich.

Mercedes is also reducing fuel consumption and carbon emissions. The new S300 BlueTec full hybrid requires just 4.4 liters of diesel to travel 100 kilometers and emits 115 grams of CO2 per km. An upcoming S500 plug-in hybrid will emit less than 75 grams.

S-Class customers are not typically too concerned about saving on fuel bills.

When asked about the four-cylinder S-Class that is only sold in Europe, Schmidt described demand as "relatively modest".

(Reporting By Christiaan Hetzner; Editing by Will Waterman)

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