Mercedes running on empty in coolant row?

The pain of the Daimler-French government stand-off is being felt at Mercedes dealerships in the western European country. But who will blink first?

July is never the best month for car sales but Oussama Kaddoura, a Daimler Mercedes agent for the past 30 years, has rarely seen one as bad as this.

France's move to outlaw sales of several Mercedes models for using an air-conditioner coolant banned by the European Union not only stops him delivering cars already on order, but is also scaring new clients away from his showroom in east Paris.

"It's all over the media," Kaddoura said of the row that broke this month when it emerged France had refused to register A-Class, B-Class and CLA-Class models assembled since mid-June.

"A customer is not going to take the risk of placing an order when there is a risk the car won't be delivered. Our rivals are happy," he said of competing German manufacturers of luxury autos such as BMW or Audi.

The dispute centres on a German decision to let Daimler continue using R134a – a global-warming gas 1,400 times more potent than carbon dioxide – because of safety concerns about the replacement chemical R1234yf.

While the old coolant is banned by EU rules in vehicles that were approved for sale since the start of 2011, France is so far the only of the bloc's 28 national governments to ban sales of models that account for roughly half of Mercedes' business.

Kaddoura, whose Groupe Como has two other showrooms in the suburbs of Paris, says he has already had to halt delivery of 37 cars, a figure going up by four to five cars a day.

With his sales staff paid partly on a commission basis, he and other distributors are having to give them advances to help them pay their bills at the end of the month.

Moreover, many of the customers who were hoping to drive their shiny new Mercedes away for the French holiday season are carless. Kaddoura said he is either lending them a substitute vehicle or offering other sweeteners to stop them cancelling their order.

"I am trying to protect the image of Mercedes in France and find solutions for our customers," he said. "But what happens if this goes on? I can't lend out 400 cars."

Hit for the economy

A local administrative court ordered France on Thursday to re-examine the case after Daimler argued that the sales freeze did not follow correct EU procedures. But the Environment Ministry reaffirmed its stance that sales would be forbidden until Daimler conformed to European regulations.

News that France was blocking the Mercedes sales came just days after Germany announced it would not support an EU accord to enforce stricter rules on carbon dioxide emissions for all cars from 2020 – a deal that would have hit German manufacturers at the top end of the sector like Daimler and BMW.

The Socialist government of President Francois Hollande is also at pains to humour its Greens coalition allies, who were angered by the abrupt sacking this month of the ecology-minded environment minister for complaining about cuts to her budget.

A spokeswoman for the environment ministry on Tuesday rejected any political motivation for the sales ban, stressing it was simply a matter of applying EU rules of which car manufacturers had advance warning over six years ago.

Jean-Claude Bernard, head of the national group of Mercedes distributors in France, said the ban was unlikely to directly help French manufacturers such as Peugeot or Renault whose mid-range cars will hold little appeal to a would-be Mercedes customer.

"But France is the only country in the EU which is blocking – I just don't understand it. The Mercedes distribution network employs 11,000 people in France, we pay our taxes – what about the harm this is doing to the economy?"

France accounted for only some two per cent of Mercedes' global deliveries in 2012. If the stand-off is unresolved in coming weeks, Kaddoura fears the damage to its brand in France will get worse in September when those clients who ordered their cars before going on holiday come back and demand delivery.

But Moise Tossou, a 36-year-old IT worker in the Paris region who ordered a new CLA is more than happy with the alternative C-Class Coupe his local dealer offered him at a 10 per cent discount on the price of €52,000.

"They explained the situation to me," he told Reuters. "In any case I don't think I would have turned to a French make as an alternative."

-- Reuters

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