UPDATE 3-Daimler names new board member to revive China sales

Wed Dec 12, 2012 11:43am EST

* New China board member "long needed change" -analyst

* Daimler veteran Troska will take post for 3 years -Daimler

* Move underscores "strategic importance" of China -Chairman

* Troska must solve distribution problems -analyst

* Daimler lagging rivals BMW, Audi on Chinese sales

FRANKFURT, Dec 12 (Reuters) - Germany's Daimler has named a new executive board member to take charge of its operations in China, the world's biggest auto market, where it is falling further behind rivals BMW and Volkswagen's Audi.

Hubertus Troska, a 24-year Daimler veteran who heads Mercedes-Benz truck operations in Europe and Latin America, will take over the newly created post on Thursday for three years to the end of 2015, Daimler said on Wednesday after a meeting of its supervisory board.

Daimler, which slipped deeper into global third place in the luxury market this year, is revamping its distribution in China, as managing two separate Mercedes sales units had contributed to its underperformance there.

Singapore-based Bernstein analyst Max Warburton said the two channels had caused internal bickering among distributors, prevented coherent sales strategies and led to unnecessary discounting.

The appointment of Troska was a "long-needed change at the top", London-based Credit Suisse analyst David Arnold wrote in a note published on Wednesday. "Daimler's China operations are one of the major disappointments for markets."

"A lot of Mercedes's problems in China have been home-made," said Ferdinand Dudenhoeffer, head of the Centre for Automotive Research at the University of Duisburg-Essen. "It's high time that a dedicated top manager tackles them."

Though economic performance in China has been more patchy this year, Chinese sales have helped German premium manufacturers to offset weakening business in recent years in core western European markets. In November, however, Mercedes-Benz suffered a 6.6 percent drop in Chinese deliveries to 16,876 vehicles, holding the year-to-date gain to just 4.2 percent, making a total of 177,301.

By contrast, sales of luxury-market leader BMW surged 62 percent to 29,005 autos in November, extending its 11-month increase to 37 percent, and sales of 274,985, while Chinese market leader Audi posted a 26 percent monthly gain to a record 37,600 autos, making a 31 percent gain so far to 370,559.

BMW and Audi manage Chinese sales through a single distributor.

"Mercedes Benz had a lot of problems to sort out its dealerships in China," said John Zeng, LMC Automotive's Asia Pacific director. "They are trying to tackle the problem now, but the dealership issue could take a long time to resolve."

Mercedes had also failed to introduce new models at appropriate prices and lacked a cohesive brand positioning to respond to changes in Chinese consumer buying patterns, said Stefan Bratzel, head of the Center of Automotive Research near Cologne.

They also misjudged a trend showing wealthy Chinese buyers preferred luxury SUVs over sedans and failed to release an SUV that could rival Porsche's Cayenne or BMW's X5, he said.

STRATEGIC IMPORTANCE

Daimler's move reflects the heightening competition among Germany's top carmakers for greater business in the lucrative Asian nation. VW, the first overseas carmaker to enter China three decades ago, appointed executive board member Jochem Heizmann in June to take charge of a special portfolio to oversee expansion in China.

"We are underscoring the strategic importance of China for Daimler," Daimler Chairman Manfred Bischoff said in a statement. "We continue to see great potential there for sustained growth and the continuous expansion of our business."

Daimler shares were up 0.6 percent as of 1138 GMT, trading at 39.69 euros in Frankfurt.

Stuttgart-based Daimler already promised 2 billion euros ($2.6 billion) in cost cuts at the Mercedes-Benz division by the end of 2014 after warning in October that it would miss its operating profit target this year by 1 billion euros.

Separately, the supervisory board also extended the contract of Daimler Trucks chief Andreas Renschler until Sept. 30, 2018.

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