Nice points Tine and IE and I'm not going to disagree altogether with you either...

I've been giving this subject a lot of thought and I'm still no nearer any cut and dried substantiated facts. As IE puts it, model expansion is a necessary evil for any premium manufacturer - especially down market to counter the threat of traditionally mass market manufacturers' premium aspirations (i.e. VWAG, Toyota, Ford etc...)

Case in point:
All of a sardine, the world's benchmark for premium compact saloons, the BMW 3er, had a ton of new competitors: 190E/C-Class, Audi A4, Lexus IS, Jag X-Type, Alfa 156 and so on... but hang on, that's not the full extent of the competition! Enter the premium hatchback segment and instantly BMW had whole new threat to contend with. The Golf IV and Audi A3 especially were directly responsible for usurping sales from BMW in the lower end of the market. I'm a prime example of such consumerism and so too are many of my friends... We bought premium hatchbacks over 318i and 320i's simply because the hatches made for better value than the slightly more expensive 3er. What we lost in terms of handling dynamics, we more than made up for in terms of price, build quality, performance and versatility.

Now, this was precisely the reason that BMW chose to introduce the 1 series: to counter the threat from a segment below. To support your point regarding staying true to BMW brand values, Tine, the new 1 series was every bit the BMW it ought to be, rear-wheel drive and sheer BMW driving pleasure. But whilst BMW's core identity was left intact, the sad reality of the 1 series is that it is a flawed hatchback that realistically only appeals to blinkered badge snobs. Compared with its competitors, the 1er is small, cramped, space inefficient and ultimately, not as versatile. Sure, it handles like a dream but don't BMW realise that a premium hatch has to be a great all-rounder? It's a car for the young, upwardly mobile family with maybe one or two small kids. Try putting a pram in the boot of a 1er, try putting a toddler into a car seat (that back door appeture is so small that any attempt is a frustrating exercise) and then take your family away for a weekend. I'd rather try this in a 5-door Golf or A3. I will be very, very surprised if the 1er sustains current sales because there are better premium hatches out there and they're not rear-wheel drive. So, in short, BMW brand values retained intact albeit with a compromised product; +1 for the brand analysts, -1 for the consumer. At least Mercedes Benz tried to fob their version off as a sports coupé bereft of any traditional hatchback virtue pretence.

What about BMW's SUV dabblings? Are they true to core brand values? Sure, they might be the best handling cars in their class (actually, they're not) but still, they are just SUV's with a high centre of gravity and raised ground clearance with none of the formidable road holding of their road-car cousins. A 5er Touring will blitz an X5 in the twisties. But, hang on you all exclaim: the X5 is an SUV! No, it's not. BMW call it an "SAV" for Sports Activity Vehicle (heaven knows what kind of sports activity one is meant to get up to in an X3/5) meaning that one shouldn't expect too much of them off the beaten track. Again, brand integrity safeguarded by an ultimately compromised concept. At least you can do some decent off-roading in an ML - and don't give me that "yeah but an X5 handles better on the road and that's where 90% will remain", if that's the case then why bother offer it in the first place. Oh wait, I remember - to compete with the ML.

I haven't got it in for BMW. Those of you who know me, know that I hold them in the highest regard - where merit is due...

Back on topic, now poor old Mercedes Benz' brand gets a pasting from Mr Trout and he puts this down to model diversification. Yes, I'll concede that the diversification may be the root cause, but then it's also a very real necessity. Building ML's in Alabama and A-Class elk test roll overs might be directly attributable to the introduction of diversified models but the problems arising from an unreliable OEM wiring harness from a trusted supplier has nothing to do with the aforementioned course of action.
Mercedes Benz has the reputation just a short while back of building unimpeachable cars that were widely regarded as the best in the world. What Mercedes did, Mercedes did best and to a large extent they do still make some beautifully put together cars. But this is a new millenium and the market forces that act on car companies are stronger and more varied than ever. Mercedes Benz might've just carried on doing what they did in the past but then would they still be here today? Perhaps, as a wholly owned subsidiary of Hyundai Motor Corp.

The best thing about mistakes is that you learn from them, and Mercedes is learning fast. Right now, they're struggling, but they'll turn the tide.

To summarise:
1. Mr Trout's assertion that brand schizophrenia is the root cause for Mercedes' identity woes is stating the obvious without acknowledging the necessity for such practice.
2. There's more to Mercedes' woes than just model diversity.
3. Other manufacturers may have introduced diversified models that retain core brand identity but those models are invariably compromised as products within the segments they compete.