Preserving Images Won’t Be Easy

They’re changing everything--except how Chrysler Corp. and Daimler-Benz market their cars.

The companies, which are uniting to form the world’s fifth-largest auto maker, say they plan to keep their product lines separate. The decision makes sense, analysts say, because Chrysler and Daimler serve very different customers, especially in the United States.

But preserving distinct images for Mercedes and Chrysler--which boasts in ads for Dodge cars that it has “changed everything”--won’t be easy. Mercedes’ storied reputation for craftsmanship is expected to cast a halo over Chrysler. But the German nameplate, which signifies luxury and status, must avoid too close an association with Chrysler, observers say.

“For Chrysler and Mercedes to be successful, it is absolutely essential that they maintain images separate from the other,” said John Grace, executive director of New York-based Interbrand, a brand-image consulting firm.

That means the combined firms must control every form of communication with consumers, down to what dealers tell potential car buyers on showroom floors, Grace said.

“It will be hard for the Chrysler selling organization not to mention the association with Mercedes to get a higher margin on the cars,” said Grace. “It is great for Chrysler, but when they do that, it denigrates Mercedes.”

The deal between Chrysler and Daimler comes at a time when Mercedes is losing some of its luster as a status symbol. Mercedes in recent years broadened its market by shaving the price of its still-costly vehicles and bringing out trendy models--such as its new sport-utility vehicles.

At the same time, Mercedes has taken steps to soften its chilly, Teutonic image in the United States with hip, breezy advertising featuring such cultural icons as Ed Sullivan and Marilyn Monroe.

In attempting to make the brand more accessible, analysts say, Mercedes has lost the status crown to German rival BMW. BMW continues to preach high performance and is being threatened by Lexus, whose advertising sets an aspirational tone for consumers.

Chrysler concentrates on lower-cost cars and trucks ranging from its popular Dodge Ram full-sized truck to the minivan category it created and still dominates. Daimler-Benz focuses on upscale luxury cars, including the company’s newly introduced Mercedes-Benz sport-utility vehicle.

And while the halo cast over Chrysler might hurt Mercedes, it could do even more damage to Chrysler’s American rivals, General Motors and Ford.

New York image consultant Frank Delano said the aura around Mercedes engineering would draw General Motors and Ford buyers to Chrysler.

“More of those people will buy Chrysler cars,” he said. “General Motors and Ford will lose share.”

But some observers envision a different scenario. Peter Harleman, managing director of San Francisco-based Landor Associates, a brand-image consulting firm, said that because Mercedes is the stronger brand, it is possible that it will replace the weaker Chrysler and Plymouth brands in the car market. He noted that Mercedes is already producing lower-cost vehicles and is likely to continue in that direction.

Harleman said that it makes sense for the combined company to continue the successful Jeep and Dodge truck nameplates and to continue with Chrysler minivans. Beyond that, he said, “I’d say it’s goodbye” Chrysler.

Harleman said that while there are risks for Mercedes in expanding into the middle market, they can be managed. “A merger like this is about leveraging a brand,” he said. “The powerful brand is Mercedes, and they will use that.”

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Times staff writer Greg Johnson contributed to this story.

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How DaimlerChrysler Stacks Up

A combined Chrysler and Daimler-Benz would rank fifth in worldwide market share and third in U.S. and California shares. The combined company would have a strong-selling product in each of five major product categories, but only one product--the Dodge Caravan--that is a sales leader in its category. Top-selling models in the U.S. for each company and units sold from January to April:

Their Products

Chrysler

Mid-size car: Dodge Stratus (8,929 units)

Sports car (luxury): Dodge Viper (157)

Minivan: Dodge Caravan (28,007)

Sport-utility vehicles: Jeep Grand Cherokee (20,035)

Luxury: LHS (493)

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Mercedes-Benz

Mid-size car: None

Sports car (luxury): SLK (1,081)

Minivan: None

Sport-utility vehicles: ML320 (3,995)

Luxury: C class (3,402)

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Bestseller overall

Mid-size car: Honda Accord (34,541)

Sports car (luxury): Chevrolet Corvette (2,785)

Minivan: Dodge Caravan (28,007)

Sport-utility vehicles: Ford Explorer (31,182)

Luxury: Lincoln Town Car (7,583)

Market Share

California (first three months of 1998)

General Motors: 25.0%

Ford: 20.6%

Chrysler/Daimler-Benz: 14.2%

Toyota: 13.7%

Honda: 11.1%

Other: 15.4%

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United States (for 1997)

General Motors: 31.1%

Ford: 23.9%

Chrysler/Daimler-Benz: 16.3%

Toyota: 9.3%

Honda: 6.3%

Other: 13.1%

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Worldwide (for 1997)

General Motors: 16.2%

Ford: 12.9%

Toyota: 9.0%

Volkswagen: 7.9%

Chrysler/Daimler-Benz: 7.4%

Fiat: 5.3%

Nissan: 5.2%

Other: 36.1%

Sources: Autodata Corp., Automotive News, J.D. Power and Associates

Photos: Associated Press, Los Angeles Times, company handouts

Researched by JENNIFER OLDHAM / Los Angeles Times

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More Coverage

* The historic alliance of Chrysler and Daimler-Benz has other car makers around the world wondering if they will be--or should be--next. A1

* Billionaire investor Kirk Kerkorian and his Tracinda Corp., a major shareholder in Chrysler, stand to come out way ahead in this deal. D5

* Britain’s Vickers said it has agreed to sell its Rolls-Royce unit to Volkswagen, terminating an earlier deal with BMW. D5