Mobilo-life To End And Service Plus.

[hawk20]

MOBILOLIFE TO END AND SERVICE PLUS.

In the past I have posted info on Mobilo-Life and Service Plus from a high level contact I have in MBUK. Here is some more information, but this time bad news.

Mobilo-Life as we know it is to come to an end.

In addition, Service Plus will end from April 14th and will be replaced with new products, with much reduced cover, and which will only be offered for new cars only.

I had been suggesting improvements to these products in line with discussions on this and other forums but my contact says: -

With regards to MobiloLife, this product has now been replaced with
"Mobilo" from 1st April 2008 for all new registrations and the website will
be updated next week to reflect the changes. We plan within this update to
publish a spreadsheet which identifies the main differences between this
offer and previous incarnations of roadside assistance offers (mobilolife
etc.). This comparison will contain the correct data that you refer to in
your earlier correspondence.

Regarding Service Contracts (now renamed Service Plans) we have had to make
some amendments to the product in order to ensure that our Financial Risk
is minimised in the forthcoming years. You are therefore correct in that
our new offer (available from 14th April) will be restricted initially to
two products available on new vehicles only.

These products will be labelled "Care" and "Total Care". Care will cover
the routine servicing as per the current offer and Total Care will cover
servicing plus friction materials (brake pads, discs, clutch, and wiper blades).

Whilst I realise that this does not provide the extensive cover currently
offered, we are not in a position to continue to offer that product.

I apologise that this new offer does not specifically include your earlier
suggestions, but this does not mean that they were not valid, but only that
circumstances have caused us to take a very different path.

 

[bill3862]

MOBILOLIFE TO END AND SERVICE PLUS.

In the past I have posted info on Mobilo-Life and Service Plus from a high level contact I have in MBUK. Here is some more information, but this time bad news.

Mobilo-Life as we know it is to come to an end.

In addition, Service Plus will end from April 14th and will be replaced with new products, with much reduced cover, and which will only be offered for new cars only.

I had been suggesting improvements to these products in line with discussions on this and other forums but my contact says: -

With regards to MobiloLife, this product has now been replaced with
"Mobilo" from 1st April 2008 for all new registrations and the website will
be updated next week to reflect the changes. We plan within this update to
publish a spreadsheet which identifies the main differences between this
offer and previous incarnations of roadside assistance offers (mobilolife
etc.). This comparison will contain the correct data that you refer to in
your earlier correspondence.

Regarding Service Contracts (now renamed Service Plans) we have had to make
some amendments to the product in order to ensure that our Financial Risk
is minimised in the forthcoming years. You are therefore correct in that
our new offer (available from 14th April) will be restricted initially to
two products available on new vehicles only.

These products will be labelled "Care" and "Total Care". Care will cover
the routine servicing as per the current offer and Total Care will cover
servicing plus friction materials (brake pads, discs, clutch, and wiper blades).

Whilst I realise that this does not provide the extensive cover currently
offered, we are not in a position to continue to offer that product.

I apologise that this new offer does not specifically include your earlier
suggestions, but this does not mean that they were not valid, but only that
circumstances have caused us to take a very different path.

Hawk 20

At least we now know what is planned and nothing in here to change my mind regarding looking at other marques more closely when replacing present vehicle. It seems some of the previous well advertised advantages of MB ownership are being 'watered down' to level of other main stream manufacturers.

I am further surprised that MB would appear to want to use phrase 'Total Care' with new Service Plans, as that implies something which would appear not to be offered i.e. cover limited to servicing and friction materials which is hardly 'Total Care' ??

Bill

 

[amwebby]

It's not clear to me from that what will happen to existing Mobilio-Life contracts. As far asd I'm concerned mine still has 21 years to run at the level of cover described in my service booklet.

 

[Bobby Dazzler]

Interesting stuff, thanks Hawk.

I suspect outside this club - and one or two others - I doubt many owners will notice the difference between ServicePlus and Service Plan Total Care.

Reason being the description appears to be the same, less the words "wear and tear". If I remember right, only brake pads, discs, clutch, and wiper blades were specified anyway.

 

[crockers]

The phrase .....long term financial risk .........says it all....MB are hurting having lost a lot with the Chysler fiasco - having to bail out the Smart project - a recession potentially emerging in the western world that will curtail the sale of new vehicles and more people buying used - then taking out a service + contract would project massive losses..(IMHO)..

If companies like Ford and GM are in financial staights - VW potentially being taken over by Porsche....any downturn in markets hits the top end luxury sector first ...coupled to govt incentives to punish high CO2 vehicles - it makes sense for MB to batten down the hatches now to ensure survival in the future......

Hopefully they do survive .... but I can imagine there are a lot of eastern preditors who would love to get their hands on the star....

 

[Rory]

I am further surprised that MB would appear to want to use phrase 'Total Care' with new Service Plans, as that implies something which would appear not to be offered i.e. cover limited to servicing and friction materials which is hardly 'Total Care' ??

I’m sure they’re looking closely at BMW who offer the same coverage but called “Service” and “Service & Maintenance”.

BMW also allows the renewal of their breakdown service every year, but it’s pretty expensive - £150 or so, I think.

I suspect outside this club - and one or two others - I doubt many owners will notice the difference between ServicePlus and Service Plan Total Care.

Reason being the description appears to be the same, less the words "wear and tear". If I remember right, only brake pads, discs, clutch, and wiper blades were specified anyway.

My impression is that, outside this club, ServicePlus is not well known at all. The first Service Advisor I asked about it at my dealer had never heard of it, and that’s only about a year ago. MB never promoted it much. I’d be intrigued to know how many people have ServicePlus contracts.

On the coverage, you’re right except that it also, almost casually amongst wiper blades and bulbs, said major units.

The phrase .....long term financial risk .........says it all....MB are hurting having lost a lot with the Chysler fiasco - having to bail out the Smart project - a recession potentially emerging in the western world that will curtail the sale of new vehicles and more people buying used - then taking out a service + contract would project massive losses..(IMHO)..

I would doubt it’s that. What I would guess is causing them a problem is financial accounting rules that force them to reserve against future potential liabilities. The scheme as it is now has (as far as I know) no limits.

 

[Matt45]

Does anyone think that MB will cancel existing Mobilo-Life contracts or do you think if we have a current contract that it will go on for the life of the car?

 

[hawk20]

Does anyone think that MB will cancel existing Mobilo-Life contracts or do you think if we have a current contract that it will go on for the life of the car?

I will do all I can to find out and post on this when I can. BUT I assume that existing cars will keep the cover given at time of sale but new cars registered, I think, from April 1st will have the new T's and C's.

I think Rory makes a good point about accounting practices getting stricter and stricter about making provisions for future liabilities. You make a car; think you have made a few hundred of profit but then the accountant says 'ah but if it goes wrong under guarantee it will cost; so we must make an appropriate deduction for that'

And if you offer 30 year rust guarantees, more provisions. And free long term breakdown cover. On it goes. I suppose we have been very lucky with the cover provided up till now.

 

[Rory]

I think that, from a sales & marketing standpoint, this is all about getting us to change our cars more frequently.

Ideally, if MB supported older cars more heavily with good value maintenance programmes then that would help hold up residuals. However, in the wider market, a Mercedes won't sell for more than its peers regardless of the support that MB throw at it. Also, anything that encourages owners to hang on to their cars for longer potentially adversly impacts new car sales.

The big snag in the UK is depreciation. It's sooo much worse here than almost anywhere else. I have no idea what the answer is but I reckon if we got rid on the 6 month change numbers on registration plates then the new car market would all but collapse in the UK.

Interestingly MB used to sell in the US at prices which included the first 4years or 50K maintenance (as BMW still does). They dropped it a couple of years ago amidst uproar from owners but it doesn't seem to have affected sales.

 

[crockers]

The point I was making - and perhaps not very clearly - is the accounting procedures that then reflect on the value of the company...and then the share price

The share price should equal = Capital Value + Future Income stream / R.F.R. + E.R.P.



RFR = Risk free rate (Govt Gilt rate + Inflation)
ERP = Equity risk Premium - the extra rate one would expect actuarially for holding equities.

So if the top line is reduced ....i.e. future income stream this WILL affect the long term share price and put MB in risk of a hostile take over

Of course the above equation takes no account of emotional sentiment which too can drive up or down shares - but is what a fund manager will use when making long term stategic decisions...the emotive side is tactical med / short.

 

[hawk20]

This is my personal view, not based on any info from inside sources, as to why MB are making the changes to Mobilo-Life and Service Plus.

Many car makers make losses. And apart from Porsche, those who do make profits do not make much per car sold. Intense competition from Japan, Malaysia and Korea keeps European profits in check.

According to a study carried out by B&D Forecast and printed in German newspaper Welt am Sonntag BMW, for example, earns £1,619 average profit per car; Audi nets a comparatively small £800 profit per car, whilst very high-volume manufacturers like Volkswagen and Chrysler make £202 and £455 respectively.

In the last year, the pound has fallen by about 17.5% against the Euro. Mercedes and BMW should put up prices by this same amount just to earn the same number of Euros as before. That would be a price increase of £3,500 on my humble A class. Now think of what that implies for E’s, S’s, SL’s, etc. And then they should raise prices again to cover inflation of commodities (steel, aluminium, plastics, copper etc etc) and the cost of higher wages and the cost of higher heating and energy costs.

Suddenly the long term cost of Service Plus, of MobiloLife and of all they make and provide has gone through the roof due to currency and commodity price changes.

But if they did put up prices drastically in UK and USA, sales would slump dramatically. So instead of raising prices dramatically, they must cut somewhere else that hurts less.

In the year 2,000 we paid 63p for a Euro. Yesterday it was about 80 pence. That is up 27% in the last eight years. And that has made sales in the UK a lot less profitable than they used to be.

In the US, another big market for MB the story is even worse. A few years back the dollar and the Euro were at parity –one Euro for one dollar. Today it is 1.575 dollars to buy one Euro. So Mercedes would need to raise US prices by over 50% just to compensate for these currency changes. They cannot do so or Lexus, Honda and other makes would take their market.

I think the huge rises in commodity prices and the changes in exchange rates particularly against the pound and the dollar are causing Mercedes to examine every possible way of reducing loss making activities so as to avoid any return to cost-cutting of the product itself. Mobilo-Life costs a lot to provide and Service Plus has been such good value it was bound to be loss making. So the cuts fell there.

 

[Bobby Dazzler]

I think there's a very simple answer.

ServicePlus was an opportunity to restore the faith and confidence of nearly new MB owners, who'd bought cars during the low point of Mercedes quality.

Quality has been much improved and the models with the most problems have since been replaced, and the need for the boost in confidence for owners of those cars have been reduced.

Owners of cars from the low point now have cars that are no longer nearly new, with values decreased considerably and their expectations realigned, and hence less of a need for a confidence boost.

Hence there is a reduced requirement for a scheme as cossetting as ServicePlus and a return to a traditional service plan.

My tuppence thrown in.

 

[television]

I think there's a very simple answer.

ServicePlus was an opportunity to restore the faith and confidence of nearly new MB owners, who'd bought cars during the low point of Mercedes quality.

Quality has been much improved and the models with the most problems have since been replaced, and the need for the boost in confidence for owners of those cars have been reduced.

Owners of cars from the low point now have cars that are no longer nearly new, with values decreased considerably and their expectations realigned, and hence less of a need for a confidence boost.

Hence there is a reduced requirement for a scheme as cossetting as ServicePlus and a return to a traditional service plan.

My tuppence thrown in.

Yes what you say must go a long way in the new thinking,, if you have shaken things up and there are not the same faults anymore then you do not need the expensive back up any longer than need be.

Its a good point

 

[crockers]

This is my personal view, not based on any info from inside sources, as to why MB are making the changes to Mobilo-Life and Service Plus.

Many car makers make losses. And apart from Porsche, those who do make profits do not make much per car sold. Intense competition from Japan, Malaysia and Korea keeps European profits in check.

According to a study carried out by B&D Forecast and printed in German newspaper Welt am Sonntag BMW, for example, earns £1,619 average profit per car; Audi nets a comparatively small £800 profit per car, whilst very high-volume manufacturers like Volkswagen and Chrysler make £202 and £455 respectively.

In the last year, the pound has fallen by about 17.5% against the Euro. Mercedes and BMW should put up prices by this same amount just to earn the same number of Euros as before. That would be a price increase of £3,500 on my humble A class. Now think of what that implies for E’s, S’s, SL’s, etc. And then they should raise prices again to cover inflation of commodities (steel, aluminium, plastics, copper etc etc) and the cost of higher wages and the cost of higher heating and energy costs.

Suddenly the long term cost of Service Plus, of MobiloLife and of all they make and provide has gone through the roof due to currency and commodity price changes.

But if they did put up prices drastically in UK and USA, sales would slump dramatically. So instead of raising prices dramatically, they must cut somewhere else that hurts less.

In the year 2,000 we paid 63p for a Euro. Yesterday it was about 80 pence. That is up 27% in the last eight years. And that has made sales in the UK a lot less profitable than they used to be.

In the US, another big market for MB the story is even worse. A few years back the dollar and the Euro were at parity –one Euro for one dollar. Today it is 1.575 dollars to buy one Euro. So Mercedes would need to raise US prices by over 50% just to compensate for these currency changes. They cannot do so or Lexus, Honda and other makes would take their market.

I think the huge rises in commodity prices and the changes in exchange rates particularly against the pound and the dollar are causing Mercedes to examine every possible way of reducing loss making activities so as to avoid any return to cost-cutting of the product itself. Mobilo-Life costs a lot to provide and Service Plus has been such good value it was bound to be loss making. So the cuts fell there.

Some very good and valid points.... but only if the european car manufacturers make the cars in Europe... If made abroad i.e. in USA a lot of the base costs drop and less dependency on currencies. Not sure is MB still make cars in USA - the W203 was South Africa so that was very profitable. W204 ?? The M was made in US but I think that is no longer the case? BMW make cars in USA..

But I think that we are both in agreement that MB can not afford to make losses if they are to remain independent....

 

[Rory]

Mobilo-Life costs a lot to provide and Service Plus has been such good value it was bound to be loss making. So the cuts fell there.

Does Mobilo-Life really cost a lot? MB are still going to have to provide cover for the first 3 years so it's to hard to see that reducing its scope will make much difference.

I also don't necessarily buy that ServicePlus was "bound" to be loss making. If it was, why didn't MB just increase the premiums?

My view is that changing things now presents 3 opportunities to screw money out of us:
1) Service Plan
2) Extended Warranty
3) Mobilo extention

and at the same time limit the coverage on all to defined levels.

 

[Bobby Dazzler]

The ML, GL, and R are indeed still built in Alabama.

 

[hawk20]

Does Mobilo-Life really cost a lot? MB are still going to have to provide cover for the first 3 years so it's to hard to see that reducing its scope will make much difference.

I also don't necessarily buy that ServicePlus was "bound" to be loss making. If it was, why didn't MB just increase the premiums?

My view is that changing things now presents 3 opportunities to screw money out of us:
1) Service Plan
2) Extended Warranty
3) Mobilo extention

and at the same time limit the coverage on all to defined levels.

The long term cost of Mobilo is huge. It provides free breakdown cover for 30 years.

The guarantee market is pretty competitive. Most seem to charge around £900-£1000 or more for an extended warranty on an E class. Service Plus gave virtually an extended warranty (on top of a service contract) for very much less than that. Great value. Probably far too good value especially now costs have risen sharply (currency etc etc).

 

[hawk20]

The ML, GL, and R are indeed still built in Alabama.

Yes but engine, transmission, gearbox, electronics etc all come from where?

 

[Rory]

Not sure is MB still make cars in USA - the W203 was South Africa so that was very profitable.

ML, GL & R Class are all made in the US and are all stupidly expensive in the UK compared to US prices. GL320CDI is under £30K in the US.

I've really no idea if hawk20's number are right or not, it's more his field and not really mine. But I do know that multinationals to all sorts of weird things with transfer pricing etc. If MB can profitably list the GL320CDi at $54K in the US then that makes the prices we pay already absurd.

 

[Bobby Dazzler]

Yes but engine, transmission, gearbox, electronics etc all come from where?

Give in - I have no idea!!

It would make sense to use local suppliers wherever practical and cost effective though.