Luxury becomes a tougher sell
WOLFGANG HUPPENBAUER
ALFRED THA HLA
The German automaker Mercedes-Benz has long been branded simply as "the market'' based on its ability to dominate more than half of Thailand's luxury passenger car sales of two million baht and up.
These days, "the market'' is facing a stiff challenge but it's nothing that Wolfgang Huppenbauer hasn't seen before.
An old Asia hand and president and CEO of Mercedes-Benz Thailand (MBT), he has experienced the stock market crash in 1987, the regional financial crunch of 1997, and is getting a fresh perspective on the pending global recession.
"I see a possible GM-Chrysler merger to safeguard some activities and factories,'' he says of the troubles facing Detroit's Big Three. "But as a German manufacturer, we are also hit by this crisis, mainly in the US market and by the hesitation of our customers worldwide to spend money.''
He sees two sides to customers. First are those with money who are being more careful about money management, and next are customers who purchase cars with surplus cash from investments such as shares or property.
"We've had a difficult nine months since Thai customers are being more careful,'' says Mr Huppenbauer. "We can see a reduction in quarterly intake, a slight hesitation to book cars.''
MBT had already prepared risk management strategies within the organisation 18 months ago by focusing on being lean with "not too much fat in regard to overhead''.
"We looked at the overall setup to see how can we manage better, become stronger and lose some fat but we didn't cut staff; we just didn't replace positions but reallocated jobs and enlarged portfolios instead. One person does the job of two. It allows people to grow.''
MBT's most important concern is stock management throughout the overall pipeline in order to achieve better risk management.
For example, since new cars sell more easily than old cars, it might be necessary to micro-manage by checking Mercedes-Benz dealerships daily to make sure there's no inventory stock buildup - combined with monitoring and incentives for dealers and salespeople.
"If you have to finance 1,500 cars in stock, it is a burden,'' the CEO points out.
MBT's risk management for its dealerships focuses on cost retail consulting by looking at the overall business, reviewing financial statements and managing dealerships to become leaner.
"We don't subsidise but we have incentives. We don't [cut prices] our cars, it's a stupid thing to do and will backfire in the long run. Up to now, none of our dealers has left yet.''
On the human resources front, MBT emphasises making its staff feel safe and motivated with a sense of security, because staff consistency in critical times is important.
"If you lose people all the time, you have to build them up again. In not-so-positive times like today, they have to be nurtured, developed and looked after.''
When it comes to personal risk management, Mr Huppenbauer himself admits he's not one to follow the stock market every day. "I keep my money in property because I believe it's a safer investment. I probably don't make the big bucks but I also don't lose big bucks. I'm old fashioned.''
Asked to comment how MBT maintains its staff despite predictions of job market layoffs, he said: "In Mercedes-Benz, our people work with us because they are motivated and they like the brand. But we empower people with responsibility, allow them to make decisions and create positions by reducing expats so that local people can grow.
"At the end of the day all expats are exchangeable but if you want to sustain a positive attitude in a company you need strong locals.''
MBT estimated sales in Thailand's overall premium car market would fall below 6,800 units in 2008 as long as political uncertainty lingers. He points to data showing a decline in project value and approvals by the Board of Investment, saying this translates into "investment and setting shop elsewhere and eventually affecting the luxury car market.''
