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Business

DaimlerChrysler Recalls 1.3 Million Mercedes

DaimerChrysler has recalled more than a million cars in its largest recall ever.

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DaimlerChrysler claims the Mercedes recall is a push for quality

The German-US auto giant DaimlerChrysler is recalling 1.3 million Mercedes cars built after June 2001 as part of what it says is a quality improvement offensive in its luxury cars division.

In a statement issued Thursday, company officials said that it wanted to update the braking systems on E-Class, SL-Class and CLS-Class cars built since that date. The company also wants to check and possibly replace the voltage regulator in alternators in six and eight cylinder vehicles built between June 2001 and November 2004. Company officials also want to update battery unit software in its E-Class and CLS-Class models made from January 2002 to January this year.

It is the company's biggest recall to date, one that is not motivated by car safety concerns.

Quality improvement will affect profits

Company officials have already said that the push to improve product quality would decrease profits.

"We are now producing the best product quality ever and our aim is to ensure that those vehicles in the hands of customers which are the cause of complaints achieve a standard of quality that reflects our highest expectations," Mercedes chief Eckhard Cordes said in a statement to Reuters. DaimlerChrysler officials declined to tally the exact cost of the recall.

Mercedes Stern

Symbol of quality?

Shares dip

Georg Stuerzer, an analyst at HVB Group in Munich told Reuters that costs could run as high as hundreds of millions of euros. "On this kind of scale I expect the cost to run into the three-digit million-euro range," he told the news agency. "The quality campaign will weigh further on the company's first quarter."

Shares in DaimlerChrysler dipped after news of the recall.

Mercedes has traditionally been Daimler's most lucrative business, but has had a bumpy ride in recent quarters.

Mercedes' profits, which slid from 20 million euros ($25.8 million) in the last quarter of 2004, have been affected by strong competition, losses by its Smart car brand, a strong euro as a result of the drop of the US dollar, the cost of launching new models and increased spending to fix quality problems.

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