It’s Fun, It’s Useful, It’s a . . . Mercedes?

TUSCALOOSA, Ala. — When the sequel to Steven Spielberg’s “Jurassic Park” opens this Memorial Day weekend, the curtain will be raised on a new dinosaur fighter.

Maneuvering its way through the pulse-racing scenes of “The Lost World” is a new Jeep-like truck built near this unlikely city by an unlikely company: Mercedes-Benz. No mere cameo performer, the M-Class is decked out in a jungle-camouflage paint job and has a near-starring role.

This sport utility vehicle has an even bigger part inside Mercedes, the distinguished German car and truck pioneer that just a few years back was being derided as an automotive dinosaur that had hopelessly lost its way.

Not only is the M-Class the first mud-spitting four-wheeler to be built by Mercedes-Benz, it is the first Mercedes of any kind to be built in volume outside of Germany. As such, it is emblematic of a wrenching five-year effort by Mercedes to reinvent itself.

Moving offshore from its deep but problematic roots in Stuttgart, Mercedes is globalizing operations--building plants in China, India and Brazil in addition to the United States, where the new Alabama factory officially opens this week. At the same time, it is revamping its familiar sedans and moving into new lines altogether: mini-cars, subcompacts, electrics, roadsters, coupes--and the M-Class, which goes on sale in September.

For image-conscious Californians who are their cars, Mercedes’ make-over has an important resonance. The state is the auto maker’s single biggest U.S. market, accounting for nearly one sale in four. The dealers can’t wait.

“I’ve already got 200 to 300 orders for the M-Class,” said Fletcher Jones Jr., a Newport Beach dealer.

These new Mercedeses are not your father’s. Audaciously bidding to upend its hard-earned personality, Mercedes--slightly dull, snooty and unapproachable--now purports to be fun, youthful and accessible.

“It’s been an incredible cultural change,” said Matt DeLorenzo, editor of AutoWeek magazine. “There will be lots of MBA candidates writing about this before it’s all done.”

Mercedes’ roots stretch back 111 years to two men and their namesake companies: Carl Benz, builder of the world’s first automobile, and Gottlieb Daimler, inventor of the internal combustion engine. After Daimler’s death in 1900, his company began building fast, stylish cars. The result was the first Mercedes, named after the 12-year-old daughter of Daimler’s successor.

Benz also was lured to top-of-the-line vehicles. Along with Rolls Royce, Benz sedans were among the best known early imports to the United States. A 1911 Benz sold for $3,250 to $8,500, compared to $900 for the Model T Ford.

With the German economy weakened by World War I, the two firms merged in 1926 to form Daimler-Benz, which grew into a vast conglomerate with interests in transportation, aerospace, railroads and financial services.

A Symbol of Luxury, Quality

Mercedes-Benz, the car and commercial truck subsidiary, became a benchmark of automotive excellence. Its three-point star--one of the world’s most recognized brand icons--was a symbol for luxury, safety and quality. German engineering was touted as the best that money could buy.

The best had no limits. It was almost a point of pride within the confines of Mercedes’ Stuttgart headquarters that its conservatively styled sedans were over-engineered and overpriced.

Such snobbish appeal and Germanic arrogance played well in the conspicuously consuming 1980s. If you are what you drive, a Mercedes said you had the best and paid the most. S-Class sedans, which could easily cost more than $100,000, became de rigueur in Beverly Hills.

As the value-conscious 1990s dawned, the Mercedes mystique vanished like a morning mist. No one seemed to want one anymore.

If she could have returned from rock heaven, Janis Joplin might have changed her tune: “Oh Lord, won’t you buy me a Lexus?” The new Toyota model, like Nissan’s Infiniti, offered German-like luxury and performance for less money.

“We found ourselves on the wrong side of the fence,” admitted Michael Basserman, chairman and chief executive of Mercedes-Benz of North America.

Recession, Taxes Hurt U.S. Sales

Sales tumbled worldwide. In the United States, they fell 41% from a peak of 99,314 in 1986 to 58,868 in 1991, a year after the Lexus LS400 was introduced for up to $15,000 less than a comparable Mercedes. Sales also were crippled by the recession following the Persian Gulf War and imposition of the luxury tax on autos that cost more than $35,000.

Although the Japanese intrusion served as a wake-up call, there was internal resistance to change. After all, Mercedes had been making cars its own way for nearly a century. The rear-wheel-drive sedans were renowned for their performance, quick handling and stiff suspensions. Enthusiasts speak of their “growl” providing character and evoking emotion.

But the cars rarely were seen as style trendsetters. Catering to conservative tastes, Mercedes changed little from year to year. Major redesigns came once a decade, compared to every four years for other makes.

Nor was efficiency--the hallmark of today’s successful auto firms--a watchword at Mercedes. At the huge Sindelfingen factory near Stuttgart, coverall-clad workers took up to 60 hours to assemble an auto--three times what the best Japanese workers required.

It did not help that German labor costs are among the world’s highest. The unionized assembly worker is paid about $30 an hour, a third more than organized hourly workers in U.S. auto plants.

Mercedes prices were pushed up further in the early 1990s when the dollar plummeted against the German mark. Dealers complained that Mercedes was pricing itself out of the market. The average Mercedes buyer was 53 years old with an annual income of $200,000. Such demographics make growth tough.

With its parent company hurting as well, Mercedes was given the green light in 1992 to make major changes. Under then-chief executive Helmut Werner--who recently resigned when he lost a power struggle with Daimler Chairman Jurgen Schrempp--Mercedes undertook a restructuring that focused on new products, cost-cutting, moving assembly operations abroad and adopting the best practices of German, U.S. and Japanese manufacturers.

The first evidence of change came in late 1993 with the introduction of the roomier, better-equipped C-Class, the entry-level sedan. It was priced just under $30,000, the same as the smaller “Baby Benz” 190 sedan it replaced--evidence Mercedes had developed a price consciousness. One telling sign: Mercedes persuaded engineers to provide a practical cup-holder in U.S.-bound vehicles, a deep bow to utilitarianism.

New Lights Make Styling Statement

Next came the redesigned 1996 E-Class. The flagship sedan was brought in at $40,000, down 9% from the previous year’s model. It also made an important styling statement. The classic rectangular headlights were replaced with four elliptical ones, giving the car a more stylish, coupe-like profile.

Not everyone embraces the changes. In a recent review, Automobile magazine editor David E. Davis Jr. said Mercedes cost-cutting was misguided and resulted in the current E-Class not measuring up to its predecessor.

“They’re dumbing down the world’s best cars,” he wrote, adding that Mercedes has shifted its emphasis from delivering quality and performance to “superficial attributes” like comfort and style.

Mercedes dismisses such criticism as out of step, noting that its new models have gotten mostly rave reviews. Most important, the consumer is buying.

While U.S. luxury car sales overall edged up 2% last year, Mercedes jumped 18% as E-Class sales soared. So far this year, Mercedes sales are up 25% and a sales record is a near-certainty.

“We will definitely break 100,000 for the first time ever in our history,” Basserman said.

Worldwide, Mercedes is on a similar roll. Sales rose 12% to 645,000 last year and are projected to top 1 million by 2000. The growth reflects Mercedes’ move to become a more full-line auto maker with premium offerings in nearly every vehicle segment.

The auto maker is in the midst of its largest new-product blitz ever. In the United States alone this year, it is introducing a record four vehicles--the M-Class, SLK roadster, CLK coupe and E-Class station wagon. It is spending $100 million to launch and advertise the lineup.

At the same time, it is introducing new products in Europe, South America and Asia, in addition to erecting plants in China and India that will build cars designed for those countries. Reports in Germany say Mercedes will churn out 30 new products in the next 10 years.

Among the more notable: the A-Class, a $20,000 subcompact to be introduced in Europe this year; the Smart car, a two-seat micro-car planned for 1998 that is being built in France in a joint venture with the Swiss maker of Swatch watches; and the world’s first mass-produced fuel-cell vehicle, expected to debut in eight years.

“They are pushing into new designs, new technologies, new markets,” said Wes Brown, analyst for Nextrend, an auto research firm in Thousand Oaks. “They have become one of the world’s most exciting companies.”

Nothing from Mercedes is generating more excitement than the M-Class, a sleek, upscale, car-like truck partly designed in California and being built in a gleaming white 1-million-square-foot plant in Alabama’s red-clay hills.

With its first-ever sport utility vehicle, Mercedes is entering the industry’s hottest--but increasingly crowded--market. The move will test whether Mercedes can reach new, younger buyers without debasing its image and alienating traditional owners.

The M-Class also is a test of the company’s globalization strategy. It is being built at Mercedes’ first U.S. auto assembly plant--its first major auto factory outside of Germany. It is doing so with an American work force that has never built a car or truck.

“It’s a very high-profile vehicle,” said auto consultant Michael Luckey. “There is an enormous amount at stake for them.”

Starting with a clean sheet, Mercedes set out to do things differently. The Alabama plant was seen as a learning field whose lessons could be transplanted back to Germany and to the new plants planned around the world.

The company tapped Andreas Renschler, a tousled-haired, untested executive who had never worked in an auto plant, to bring the factory on line. Renschler, 39, is the youngest manager of any Mercedes facility.

Mercedes claims that its globalization strategy is not aimed at freeing itself from Germany’s high labor costs and strict working rules, but at getting closer to consumers and markets by building where most of the vehicles will be sold.

Hiring, Training Workers in U.S.

One danger is damage to the Mercedes image because it is so linked to German engineering. “We had to get away from ‘Made in Germany’ and focus instead on ‘Made by Mercedes,’ ” Renschler said.

This meant hiring and training a U.S. work force that would be infused with the Mercedes tradition, particularly a meticulous attention to quality and detail. One reason that Mercedes settled in Alabama--besides the state’s generous $250-million incentive package--was the availability of labor and willingness of local officials to support training efforts.

There was no shortage of able bodies: The first 900 workers came from a pool of 45,000 applicants. Another 400 will be hired in the next few months, with 1,500 eventually employed at the site. Each applicant must endure up to 80 hours of testing.

The most important attribute Mercedes looks for: the ability to work in teams. About 165 early hires were sent to Germany for training. They then served as trainers in Alabama along with 70 Germans here to oversee the opening.

The workers start at about $13 an hour and within two years work up to $18 an hour. This is slightly less than union wages paid by the Big Three U.S. auto makers, but $8 to $10 more than the prevailing manufacturing wage in Alabama.

The Alabama plant is serving as a test bed for new production procedures that Mercedes hopes to adapt for the plants it is building in Brazil, China and India. As plant manager, it hired William Taylor, a veteran of Toyota and Ford, who is helping Mercedes adapt some practices of the best Japanese and U.S. manufacturers.

The plant, which cost about $300 million, is geared to build 70,000 vehicles a year. About half will be sold in the U.S., with the remainder exported to Germany, Japan and elsewhere.

Some analysts think that Mercedes is late to the sport utility game. The segment has grown from about 1 million sales a year in 1992 to more than 2 million last year. Increasingly, consumers are trading in cars for sport utilities, which project an adventuresome image.

Major Success Predicted for M-Class

But most expect demand to far exceed supply. If so, Mercedes could quickly expand the plant for more volume or for a related vehicle.

“I expect the M-Class to be an enormous success,” said Bill Pochiluk, president of Autofacts, a global consulting firm. “They will do major damage in that segment.”

One possible reason is the M-Class will be priced about $35,000--certainly not cheap, but an affordable premium alternative to top-of-the-line Jeep Grand Cherokees and Ford Explorers with the added fillip of the Mercedes name.

The vehicle also is likely to draw a younger clientele. The average age of a Mercedes buyer has fallen to 50 on the strength of its recent new products, and the company sees it falling into the 40s with the M-Class.

The sport utility vehicle has a rounded, aerodynamic look that makes it appear much smaller than it is. Mercedes touts it as a four-wheel-drive, six-cylinder vehicle with a unique independent front-and-rear-wheel suspension and all the performance, handling and luxuriousness of its sedans.

The first marketing assault for the M-Class--four months before it reaches showrooms--will come with the Friday release of Spielberg’s “The Lost World.”

Mercedes paid $8 million to have the film’s stars put it through its off-road paces while on the lookout for dinosaurs. It will also tie the movie into the sale of toy replicas and assembly kits of the vehicle.

“This is an ideal placement for the M-Class,” said Michael Jackson, president of Mercedes-Benz of North America. “It will show the off-road capability even to the extent that it can handle itself among dinosaurs.”