DaimlerChrysler to Oust President of U.S. Division
The mood among Chrysler workers was as glum as the rain that drizzled on their North American headquarters Tuesday as the U.S. arm of DaimlerChrysler absorbed news of the impending ouster of its president, the latest in a series of executive departures.
James P. Holden would be the latest top-level executive of the Chrysler Group to be axed or to leave voluntarily since the takeover by Germany’s Daimler-Benz in 1998. Holden’s dismissal is expected to be announced Friday after a DaimlerChrysler Supervisory Board meeting in Stuttgart, Germany--exactly two years since “Day One,” the day the newly formed DaimlerChrysler began trading amid great optimism on the New York Stock Exchange.
News of Holden’s departure comes after the Chrysler side reported a $512-million loss in the third quarter, attributed largely to huge spending on incentives to sell slow-moving vehicles. He will be replaced by Dieter Zetsche, the head of DaimlerChrysler’s commercial-vehicles division, who is close to company Chairman Juergen Schrempp, the Detroit News said Tuesday.
“It’s very disturbing,” said a DaimlerChrysler senior manager, who said morale at the company had once again nose-dived. “It makes it fairly tough to focus on the work we have to do.”
DaimlerChrysler employees at North American headquarters in Auburn Hills, a northern Detroit suburb, are disheartened by recent statements by Schrempp saying he never intended the deal to be a merger of equals and that he viewed Chrysler as simply a division of Daimler-Benz, said the source, who would not be identified further.
“His comments really upset a lot of people,” the source said. “Why would he say that? It galvanized a lot of people not against the Germans but against Schrempp.”
Transatlantic relations between the “co-headquarters” in Auburn Hills and Stuttgart have reportedly ranged from tolerant to testy and have never been particularly warm. Americans are outnumbered on the management board, and their say in the running of the corporation has been consistently eroded. Schrempp has been criticized for not visiting Michigan much, supposedly because he doesn’t like it, and for renovating corporate suites in the Chrysler Building in New York City, reportedly to hold executive meetings there.
Replacing Holden with Zetsche “is making a bad situation worse,” said Nicholas Lobaccaro, Lehman Bros.’ auto analyst in New York.
“They’re already in a pretty weak position to be putting in someone who is not going to be familiar with the company,” he said.
Some executives tried to take it in stride.
“Welcome to DaimlerChrysler, where you never know what to expect--and neither do we,” said Trevor Creed, Chrysler’s vice president of design, as he greeted a group of journalists visiting headquarters for an advance look at an all-new Jeep sport-utility vehicle to be introduced in January.
Holden, 49, was named head of the Chrysler Group, also known as DaimlerChrysler Corp., in October 1999, succeeding the short-lived presidency of Thomas Stallkamp, a longtime Chrysler executive himself who was ousted by the German-dominated board last year.
A steady stream of Chrysler executives has retired, been booted or resigned from the company to work at rival Ford Motor Co., supplier companies or consultancies. Predicting the next move in the exodus has become something of a pastime to Detroit watchers.
The latest problems center on bloated costs in North America--and Schrempp’s having learned of temporary U.S. plant shutdowns to reduce inventory from industry analysts and not from Holden. Chrysler was also slammed by the high levels of incentives, or price breaks to customers, that it put on slower-selling models this year, especially the 2001 Chrysler Voyager, Town & Country and Dodge Caravan minivans--which were totally redesigned for that model year and began coming off assembly lines only this summer.
“In such a competitive market, they introduced an evolutionary product that was nowhere near the improvement that the last one was,” said Jim Hall, a senior consultant with AutoPacific in Detroit. “It’s an indictment of their competitive assessment of where the market is headed. They underestimated key competitors such as Honda for their core product.”
New cars should be hot sellers right out of the box, Hall and others noted, and not need incentives early in the model cycle.
The stock has gone into a tailspin, losing more than $60 billion in market value since share prices peaked at $108 in January 1999. Shares ended trading Tuesday at $46.40, up 1 cent, on the NYSE.
It’s been a long spiral downward for Chrysler, which only a few years ago was the envy of the North American auto industry, making the most money per vehicle under the leadership of an energetic, capable executive team that developed such head-turning cars as the Dodge Viper, Plymouth Prowler and Chrysler PT Cruiser.
“Holden’s departure in itself is unsettling because there’s already been a significant brain drain,” said Phil Gott, head of automotive research at the consultancy DRI.
” . . . They assume someone from Stuttgart can understand the U.S. market better than the people who grew up in this market, and that’s questionable logic to me.”
Zetsche, 47, became head of DaimlerChrysler’s commercial vehicles Oct. 1, 1999, the same day Holden assumed the Chrysler Group’s presidency.
As head of commercial vehicles, he is in charge of Freightliner, the company’s U.S. heavy-truck division, and played a role in resisting unionization there. That is likely to cause tension with the United Auto Workers union, which is already angered at DaimlerChrysler for what it perceives as attempts to thwart unionization at the Mercedes-Benz plant in Alabama.
But Zetsche has a reputation as a savvy “product guy”--always a respected trait in Detroit.
“He’s gained friends on the Auburn Hills side of the company,” the Chrysler source said. “He has a good reputation, an engineering background. If he comes to run the group, it won’t be all gloom and doom.”
