Helmut Werner (born 1936) made a name for himself as a brilliant and innovative manager during his four years as chief executive officer and chairperson of the board of Mercedes-Benz. When Werner joined Mercedes-Benz in 1993, sales were declining and production costs were soaring. Through cost-cutting measures, new car designs, and revamped marketing, Werner almost single-handedly returned Mercedes-Benz to a profitable force in the automotive industry.
Werner was born on September 2, 1936, in Cologne, Germany, the eldest son of a prominent bank director. In 1956, he graduated from the Abiture Beethoven-gymnasium, and went on to earn a business degree from the University of Cologne in 1961. Werner intended to be an auditor, but only completed the initial stages of the seven-year training program. Following his graduation from college, Werner took a position with Englebert & Co. He found himself well suited to the challenges and rewards of sales, and he became the sales manager in 1969. A year later, Werner moved on to become the general product manager for Uniroyal Europe in Liege, Belgium. In 1978, he was hired as the company's managing director. He served on the executive board of Continental Gummi-Werke AG in Hannover, Germany, in 1979, and was the company's chairperson from 1982 to 1987.
In 1987, Werner became a member of the executive board of Daimler-Benz, the parent company of Mercedes-Benz. His time at Mercedes-Benz brought him recognition as a brilliant and crafty manager. He became chief executive officer (CEO) of Mercedes-Benz on May 27, 1993. Over the next four years, he recreated Mercedes-Benz's image and turned the company around, from losing money to once again gaining a substantial profit.
When Werner came on the scene in the early 1990s, Mercedes-Benz was the world's largest producer of luxury cars. However, for several years, sales had been falling, and production costs were rising rapidly. It was clear to Werner that Mercedes-Benz could not continue to depend on high-performance, expensive cars to sustain the company. Even before he was officially in his new position as CEO in 1993, Werner announced drastic changes and a new direction for the company. Noting the affects of worsening traffic congestion and environmental concerns, he suggested that the prestigious image of Mercedes-Benz's cars was meaningless. His plan called for a new line of vehicles aimed at a lower-priced market. Werner also began focusing on cutting production costs, reducing development time, and taking the company global. When he announced his intentions for the company, many in the auto industry were skeptical of his ability to fulfill these goals.
In a 1990 study done by the Massachusetts Institute of Technology's International Motor Vehicle Program, Mercedes-Benz was confronted with the harsh reality that a 35 percent productivity gap had developed between it and Toyota, as well as other Japanese producers. Mercedes-Benz appeared to be moving in the wrong direction, and the numbers bore that out. In 1992, Mercedes-Benz produced 530,000 cars-48,000 fewer than the year before. In 1993, the German car company experienced an $800 million loss. Its biggest seller, the E-Class model, was eight years old, and another mainstay, the C-Class model, was 10 years old. Production numbers were falling, and losses were growing. Werner needed to act quickly.
Werner set out to train his production and managerial staff to think differently. One of the first actions he took was to reduce the number of management levels between his office and the production floor from six to four. In an exercise to make a point about every manager's expendability, Werner had every one of them draft a letter of resignation, thus sending the message: be productive or leave. He also made plant managers responsible for operating within budgetary limits. In the past, Mercedes-Benz's development and production strategy began with the engineers who would set out to design the best car possible. Cost and time were not considered. After the vehicle was designed, the sticker price was determined by adding a profit to the cost of the car. Werner turned that around, first setting a target sticker price and then building the car accordingly. In an interview with reporter Diana Kurylko of Automotive News in November 1993, Werner commented, "We have to combine the good old qualities with what is necessary to really deal with the future demands of customers. Cost comes very much into the discussion. People in our company have really started to understand what kind of challenge is being presented by this new formula."
Mercedes-Benz engineers had a reputation for extended design time, taking months to make simple changes such as a headlight. Werner wiped out the mentality that each new car needed to be heavier, equipped with more technology, and increasingly expensive. He also pressured his engineers to work faster. By 1996, productivity rose over 30 percent, saving an estimated $2.3 billion.
Werner's cost-cutting measures also had an immediate impact. The company saved 4 billion marks ($2.34 billion) in 1993, and the labor force was reduced by over 11,000 to 148,500 workers. In 1994, Werner led cost-cutting measures that equaled $2.75 billion. As a result of these changes, Mercedes-Benz was able to offer models over the next for years that were priced competitively with its main rivals, such as Toyota's high-end Lexus division. The sticker price of the 1996 C-Class in the United States was $29,900, which was $700 less than Lexus's comparable ES300 model. Just five years earlier, the Baby Benz 190 cost over $9,000 more than its counterpart, the Lexus ES250. Over the course of three years, Werner turned the loss of $800 million in 1993 to a gain in 1996 of almost $1.5 billion.
New Models, New Image
Besides creating a new environment that focused on increased productivity and reduced cost, Werner also moved to give the company a make-over in image and offer smaller, more affordable models. His goal was to introduce models into every market, not just high-priced luxury cars. He envisioned compact cars, minivans (or "people carriers" as they are referred to in Europe), and sports utility vehicles. New and redesigned models introduced during Werner's reign included the 1996 SLK, a roadster with a base price of $35,300. The car was immediately popular with affluent forty-somethings, and the first production run of 35,000 was sold out until 1998. Werner also made plans to introduce a small car, the A-Class, which would measure only 11 feet and sell for about $20,000 in Germany. In 1996, the V-Class, a van, was introduced for $35,400 base price. Mercedes-Benz included the M-class, an off-the-road vehicle, with a base price of $35,000, into its 1997 lineup. The next year held plans for the Smart micro-car, just 7.5 feet long, in a joint venture with Switzerland's SMH Swatch watchmaker, selling for $10,000 to $14,500. Although Werner refused to comment on the reports, the rumor circulated around the automotive industry that Mercedes-Benz planned for nearly 30 new models to be in the market by 2008.
Werner also worked to increase a sluggish market for Mercedes-Benz in the United States. Advertising in the United States was revamped to appeal to the baby boomers. One spot featured the phrase penned by the 1960s cultural icon Janis Joplin, "Lord, won't you buy me a Mercedes-Benz." Additionally, new models of the E-class included cup holders, not a popular feature for Germans, but considered a basic necessity by Americans. As a result, Mercedes-Benz sales increased in the United States in 1996 by over 17 percent.
Werner's strategy also included the globalization of Mercedes-Benz. In his interview with Diana Kurylko of Automotive News, Werner said, "In the automotive industry you can only survive in the long run on a global basis. This is a global market." New markets targeted by Werner and Mercedes-Benz included Latin America (specifically Brazil and Argentina), India, Thailand, Vietnam, and China. He also looked for new locations that would facilitate less costly production and cheaper parts. In 1996, only five percent of the company's automobiles were made outside of Germany. Werner's goal was to increase that number to 25 percent within 10 years, without reducing the production numbers in Germany. Mercedes-Benz already maintained a plant in Mexico, and plans were made for the minivan model to be produced in Spain and the sport utility vehicle to be produced in the United States at the company's plant in Alabama.
Resigned from Mercedes-Benz
Werner had stunned the auto world by doing much of what he had promised when he became CEO at Mercedes-Benz. While the company was celebrating its success, its mother company, Daimler-Benz, was not doing well. Jurgen Schrempp had become chairperson of the money-losing conglomerate in May 1995. He sold or shut down one-third of Daimler-Benz's businesses, including much of its aerospace business. By 1996, the Mercedes-Benz division, which had up to then run almost independently from Daimler-Benz, accounted for 75 percent of Daimler-Benz's sales of 105 billion marks ($65 billion dollars), and almost all of its profits. With its workload diminished by the downsizing, the Daimler-Benz board had more time to turn its attention to Mercedes-Benz, and the Mercedes-Benz board, including Werner, began to be perceived as an unnecessary layer of leadership. Rumors began to fly that Schrempp was moving to push Werner out.
The rumors proved to be true, and in early 1997, the Mercedes-Benz board was dissolved and Schrempp took control of Mercedes-Benz. On January 16, 1997, Werner officially resigned from Mercedes-Benz. During his almost four years at Mercedes-Benz, Werner is credited with eliminating huge losses suffered in 1993, restoring profit growth, and increasing productivity dramatically. He also prepared the way for the merger between Daimler Benz AG and Chrysler Corporation in May 1998. The new Daimler-Chrysler company is expected to be one of the largest auto-makers in the world, with sales of $130 billion and 421,000 employees.
After leaving Mercedes-Benz, Werner served as the chairperson of the Supervisory Board of the Expo 2000 and as a member of the supervisory boards of Alcatel Alsthom, IBM Deutschland GmbH, Gerling-Konzern Versicherungs-Beteilgungs AG, and BASF AG. Werner was named a principal in Penske Capital Parners, L.L.C., a company that acquires businesses in the transportation industry. In 1998, he became chair of the industrial and trading group Metallgesellschaft. He also sat on the board of directors of the JP Morgan Germany Advisory Council.
Business Leader Profiles for Students, edited by Sheila M. Dow, Gale Research, 1999.
Automotive News, November 27, 1993; December 13, 1993;January 20, 1997.
Business Week, August 26, 1996.
Economist, January 30, 1993; December 7, 1996. □