y Alex Taylor III, Fortune senior editor
November 20 2006: 9:11 AM EST
NEW YORK (Fortune) -- There is an old saying in the newspaper business that you shouldn't pick a fight with somebody who buys ink by the gallon.

That hasn't stopped Mercedes-Benz from taking a few swipes at Consumer Reports over some very damaging reviews of Mercedes vehicles.

First some background: For the 2007 edition of its New Car Preview, Consumer Reports surveyed its six million subscribers about what serious problems they had with the cars they own. Some 1.3 million responded and the results weren't good for Mercedes-Benz.

Here's a brief blow-by-blow: In a listing of the least reliable luxury cars, based on 2006 models, three of the six cars are Mercedes: the old S-class (prior to the recent redesign), the CLS and the E-class Sedan.

Same thing in sport cars. Mercedes hogged three of the seven slots for least reliable: the SL, the CLK and the V6 SLK.

Among mid-sized SUVs, the M-class, a quality disaster when it first came out, still ranks as the least reliable in its grouping.

Other luxury manufacturers turn up on the least reliable list, with BMWs, Jaguars and Cadillacs sprinkled throughout.

But what is striking about Mercedes' performance is its consistency. Of the 11 models reviewed by Consumers, none are recommended. Seven are left off of the list because of poor reliability; the remaining four are considered too new to predict.

Mercedes has the worst record of any automaker with that many models. For a brand that claims to be "engineered like no other car in the world," that is fairly frightening.

"They understand the problems and they are fixing some of them, but they have a long way to come," says David Champion, director of automotive testing at Consumers.

For its part, a spokesman for Mercedes says that the data in the Consumer Reports rankings "is totally out of sync with what we're seeing in the mainstream research as well as our own customer satisfaction and warranty data." He points to the good marks Mercedes gets for ride, handling, comfort, safety and performance.

He may be whistling into a windstorm, though. "Car buyers pay a lot of attention to CR's ratings," says industry consultant George Peterson. "They perceive them as unbiased."

Research by Peterson's own firm, AutoPacific, substantiates CR's findings. Its 2006 Ideal Vehicle Awards show Mercedes not only ranking ninth out of ten among luxury brands but also lower than the top ten mainstream brands like Hyundai (Charts) and Subaru.

Quality problems have been a big issue at Mercedes for several years and the company keeps insisting It has a handle on them. But issues keep cropping up.

The JD Power Initial quality study for 2006 models, which measures defects identified by customers during the first 90 days of ownership, put Mercedes at 25th out of a field of 37 brands. That was well behind leaders like Porsche, Toyota's (Charts) Lexus, Jaguar, GM's (Charts) Cadillac and Infiniti, though still two notches ahead of BMW.

The Mercedes spokesman blames that low ranking on two major complaints: brake dust from the high performance brakes and problems with the new seven speed transmission, that he says have been repaired.

He adds: "As you're aware, the IQS included a new survey methodology by JD Power which goes well beyond the actual quality of the vehicles and into subjective measurement (an important distinction) of how customers feel about such things as the design, look and operation of features, controls and equipment."

Mercedes still makes superb automobiles - striking in design, sophisticated in engineering, exhilarating in performance. It attracts hugely loyal buyers and its cars retain value better than most.

But being a leader means being constantly under attack by those behind you. Along with BMW and Lexus, Mercedes ranks in the top tier of luxury brands.

But until it can tame the devilish complexity of its cars into more reliable transportation, its position will remain precarious. And it doesn't help to be in denial about the problems you face - or to attack the messenger who delivers the bad news.

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When two independent agencies (using completely different methodologies) arrive at the same conclusion, it's time to quit believing one's own notions. There is something wrong and DC better get on it or they will loose the residual cachet that they have.

B

Do you mean the loyal customers when you are talking about the residual cachet?

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2006 BMW M5 "Heidi" @ 109,000 miles
2005 MBZ C55 AMG "Lorelai" @ 165,000 miles
1991 MBZ 300E "Benzachino II" @ 165,000 miles
1990 MBZ 500SL "Shoshanna" @ 118,000 miles

(On the hunt for a good used M103 engine as of 6/10/23, PM me if you have one to sell!)

Certainly them. But also the non-owners--folks who would like to own one someday because they still believe that Mercedes-Benz means finest quality engineering. I can truthfully tell them that mine is the best car I have ever owned: 1995 E320.