Daimler says refrigerant won't delay S-Class launch

Wed Feb 20, 2013 9:11am EST

* New vehicle key to Daimler plans in weak market

* S-Class range carries double-digit profit margins

* Top-end model to compete with Rolls-Royce and Bentley

FRANKFURT, Feb 20 (Reuters) - Daimler's summer launch of its Mercedes-Benz S-Class saloon will not be delayed by uncertainty over whether the German car maker must use Honeywell's new air-conditioning refrigerant.

"The S-Class will ramp up as planned and enter the market this summer," a spokesman said on Wednesday, denying that its refusal to comply with European Union legislation over the use of the new refrigerant could force authorities to delay or even stop its launch.

Daimler is banking on the success of the new S-Class, expected to hit European markets in July, to help it to offset a weak first half and achieve flat underlying full-year profit.

The flagship S-Class range is a cash cow for Mercedes thanks to its estimated double-digit profit margins.

"While news over a delay to the S-Class are obviously of great interest to the German press, we are somewhat more sceptical as to whether the (refrigerant) issue can really delay the launch of the vehicle," Credit Suisse said in a note to clients.

The impending launch has acquired additional significance as a replacement for Daimler's now-defunct Maybach. A more luxurious version of the S-Class - expected to be called the Pullman - will compete with BMW's Rolls-Royce and Volkswagen's Bentley cars.

The new S-Class was approved for sale in the European Union under the requirement that it does not use the R134a air-conditioning refrigerant - a hydrofluorocarbon that can warm the climate roughly 1,400 times more than carbon dioxide when it escapes into the atmosphere.

Citing safety risks, Daimler has since refused to use the HFO-1234yf refrigerant that is the only one to meet the EU requirements and is supplied exclusively by Honeywell and its production partner DuPont.

The EU said that there are no grounds for extending the phase-in of its directive, but it has requested that the German authorities substantiate their safety concerns with a definitive report by the KBA motor vehicle authority.

The KBA approves new cars for sale in Germany on behalf of the EU and could theoretically force Daimler to cease selling its A-Class, B-Class and S-Class vehicles, which are all required to use the new refrigerant in Europe.

Daimler, Volkswagen and BMW all withdrew from an industry working group looking into the safety of the refrigerant, criticising the group's methods and two press statements defending the chemical before test results are published in the second quarter.

"We would hope that the KBA understands that Daimler's concerns over HFO-1234yf are legitimate and that an amicable solution to the issue can be found," Credit Suisse said.

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