Daimler Chief to Step Down
Juergen Schrempp, the German auto executive who engineered Daimler-Benz’s 1998 takeover of Chrysler Corp., announced his resignation Thursday in what some analysts said was a stunning repudiation of his leadership.
Schrempp will step down as DaimlerChrysler’s chief executive Dec. 31. His replacement is Dieter Zetsche, 52, a Daimler veteran who has run U.S.-based Chrysler Group since 2000 and is credited with reviving its fortunes.
Seven years ago Schrempp envisioned DaimlerChrysler as an automotive powerhouse, with the luxury Mercedes-Benz brand and mass-market Chrysler and Jeep models offering product lines to withstand growing global competition. Although the company became the world’s fifth-largest automaker, his dream never materialized.
Chrysler piled up losses in the U.S., its Smart minicar brand in Europe has been hugely unprofitable and Schrempp pumped billions into Japan’s struggling Mitsubishi Motors Corp. Last year DaimlerChrysler quit its Mitsubishi alliance after an internal management revolt. In this year’s first quarter, Mercedes-Benz lost more than $1 billion, its first red ink since 1993, as the brand was plagued by quality problems, embarrassing recalls and sluggish sales.
DaimlerChrysler’s stock has plummeted 41% since the $36-billion acquisition of Chrysler. Critics say the deal diverted the company’s attention from its Mercedes-Benz brand to fix Chrysler’s problems as well as others.
Schrempp, 60, announced his resignation as DaimlerChrysler reported a 28% rise in second-quarter earnings. A 44-year company veteran who got his start as an apprentice mechanic, Schrempp will step down two years before his contract expires.
Schrempp and DaimlerChrysler tried to put a good face on his early retirement, calling it a mutual decision, but most analysts believe that he was told to leave. Although his contract runs until 2008, Schrempp reportedly won’t receive a severance package.
“It’s pretty obvious he was pushed,” said David Healy, auto industry analyst for Burnham Securities. “He told journalists ... just a few months ago that he was in it for the long haul.”
Conversely, Zetsche “is a real star who is being rewarded for what he’s done at Chrysler,” said David Cole, director of the Center for Automotive Research in Ann Arbor, Mich.
Investors rejoiced, sending DaimlerChrysler stock soaring 10% on Thursday to $48.26, up $4.29. “This is the day I’ve been waiting for,” said J.P. Morgan automobile industry analyst Philippe Houchois.
Ironically, Chrysler is surging in the U.S., with eight consecutive quarters of operating profit, while rivals General Motors Corp. and Ford Motor Co. are losing money on their North American auto operations.
Zetsche was handpicked by Schrempp to fix Chrysler after it posted a $512-million quarterly loss in 2000 and was struggling to handle the post-merger culture clash.
He turned Chrysler around by trimming 40,000 jobs, closing plants and rolling out new models. The hot-selling Chrysler 300, Dodge Magnum and Charger, with features such as the 345-horsepower Hemi engine, have attracted new buyers. Now the Chrysler Group earns more than its sister Mercedes-Benz unit.
On Thursday, DaimlerChrysler said profit rose to 737 million euros ($884 million) for the second quarter. Sales rose slightly to 38.4 billion euros ($46 billion) from 37.07 billion euros.
Mercedes posted a 12-million euro ($9.9 million) operating profit. Operating profit at Chrysler Group rose 4% to 544 million euros ($450 million), above analyst estimates of 412 million euros ($340.8 million).
The financial news, analysts said, made it the perfect time to move Schrempp out.
Chrysler Group’s chief operating officer, Tom LaSorda, 51, will become president when Zetsche returns to Daimler headquarters in Stuttgart at the end of the year. LaSorda is a former GM manufacturing executive recruited by Zetsche in 2002 who is credited with modernizing and streamlining Chrysler’s manufacturing operations.
In a statement, Zetsche said it was too soon to discuss changes he might make. Analysts said he was unlikely to divest Chrysler, but questioned whether he would want to keep DaimlerChrysler’s 30% stake in Airbus parent EADS.
Cole and other U.S. analysts were upbeat about Zetsche’s appointment, saying it would be good for DaimlerChrysler and for Chrysler Group as well.
“He will be moving back to Stuttgart with a soft spot in his heart for the U.S. operation” of Chrysler Group, said Michael Jackson, chief executive of the AutoNation new-car dealership chain and a former head of Mercedes-Benz of North America.
Jackson, who reported directly to Zetsche at Mercedes, described him as an “inspirational leader who motivates, attracts and inspires talent.”
Zetsche was born in Turkey and educated in Germany, where he earned a doctorate in electrical engineering and began working for Daimler-Benz in its research department.
When Zetsche reported to Chrysler headquarters five years ago, Cole said, employees “got a smart, affable coach who got Chrysler to finally function as a team that believed in itself.”
Instead of issuing orders from behind a desk, Zetsche made the rounds. He showed up in jeans and Western shirts at Jeep off-road events, and ripped the bumper cover off a 2005 Grand Cherokee while trying to negotiate a rocky incline. He gave Dodge engineers approval to build a 500-horsepower motorcycle called the Tomahawk to draw attention to the company’s engine and design prowess at the 2003 Detroit Auto Show.
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Times wire services were used in compiling this report.
