Schrempp to Step Down

FRANKFURT, Germany -- DaimlerChrysler CEO Juergen Schrempp, architect of the controversial merger between Daimler-Benz and Chrysler Corp., will step down and turn the top job over to Chrysler head Dieter
Zetsche, the company said Thursday.
Zetsche will be replaced at Chrysler by current No. 2 Thomas LaSorda in changes that take effect at the end of the year. Chrysler executive Eric Ridenour will take LaSorda's place.
The news came as the world's fifth-largest automaker reported improved quarterly earnings and a slight rise in sales. DaimlerChrysler's shares jumped nearly 10 percent after the announcements. The stock traded at 39.80 euros ($47.72) by afternoon in Frankfurt.
Schrempp, who started with the company 44 years ago as an apprentice mechanic, designed the 1998 merger of Germany's Daimler-Benz and Detroit's Chrysler Corp. in an attempt to create a global auto giant. The merged company has struggled, first with heavy losses at the Chrysler division and now with weak earnings at its former cash cow, Mercedes.
Some investors have criticized Schrempp because the company's stock price has lagged since the merger. Comments he made about the deal in a newspaper interview also led to investor Kirk Kerkorian suing the company over the terms of the deal, a suit the billionaire lost earlier this year.
In a letter to employees, Schrempp said that "through our brand and product portfolio and our presence in more than 200 countries, we are uniquely positioned. Profits have risen steadily and we are on the way to reaching the goals set under my chairmanship."
"In view of this positive development, the board of directors of DaimlerChrysler and I agreed that the end of 2005 would be the best time for a change in leadership of the company."
Schrempp said during a conference call that he was leaving in good spirits.
"All in all I am satisfied with the advances made," he said. "Clearly DaimlerChrysler is not yet where it wants to be, although I am sure it will arrive. We are heading precisely in the right direction."
"On a personal note, I can assure you that I am a very happy man."
Zetsche, 52, has earned plaudits for his turnaround of Chrysler, which has bounced back on the strength of hot-selling new models such as the 300.
DaimlerChrysler said Schrempp, whose contract was valid through 2008, would leave at the end of the year and would draw no salary after the end of 2005.
The supervisory board and Schrempp "are in full agreement that the end of the year 2005 is the optimal time for a change in the leadership of the company," board Chairman Hilmar Kopper said. "The decisions of the supervisory board have been made unanimously after a thorough process."
Schrempp began as an apprentice mechanic in 1961. He has risen through management positions including the leadership of Daimler-Benz operations in South Africa, the United States and in Germany. He also served as chairman of Daimler-Benz Aerospace.
The news partly overshadowed DaimlerChrysler's release of second-quarter earnings, which came to 737 million euros ($884 million) compared with 577 million euros a year earlier. Its operating profit fell 20 percent to 1.67 billion euros from 2.09 billion euros.
Sales during the quarter rose slightly to 38.4 billion euros ($46.04 billion) from 37.07 billion euros.
The results were helped by a strong performance from the truck and bus unit, which offset narrower earnings in its luxury Mercedes Car Group unit.
The Mercedes unit posted a scant operating profit of 12 million euros ($14.39 million) for the quarter, a 98 percent drop from last year. Revenue was 12.4 billion euros ($14.87 billion), down 4 percent from 12.97 billion euros.
The company's Chrysler Group, however, showed a 4 percent gain with operating profit rising to 544 million euros ($652.26 million) from 521 million euros a year ago. Sales were down 1 percent to 13.03 billion euros ($15.62 billion) from 13.2 billion euros.
The number of Chrysler cars sold rose 4 percent to 812,200 from 781,400.
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Even though there was a great deal of controversy, his strategy may well be vindicated in time.
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greek_philosophizer wrote:

NEW YORK - In the few hours after DaimlerChrysler announced that chairman Jrgen Schrempp would step down at the end of the year and be replaced by Chrysler Group Chief Executive Dieter Zetsche, the market capitalization of the company rose 10%, or $4.3 billion.
Telling, isnt it?
Sure, part of the markets reaction had to do with a 28% rise in second-quarter earnings, also announced Thursday, but the big driver was the management change.
Jurgen Schrempp, who has been chairman since 1994, has spent his last decade in power making breathtaking strategic moves. He was creative. He was bold. But his most striking attribute has been his staying power. Because his bold moves rarely paid off.
Schrempps grand idea was to jump into the arms of globalization by building an automotive giant that spanned the worlds three major marketsEurope, North America and Asia. His first move was to buy Chrysler in 1998, for $36 billion. It seemed like a good idea at the timejust after the merger, the newly minted DaimlerChrysler (nyse: DCX - news - people ) was valued at $84 billion, and it soon reached as high as $108 billion. Now, even with Thursdays boost, the company is worth just $49 billion.
That's because things quickly went sour. The merger was a train wreck. Chrysler Group executives left in droves. The company, once Detroits most profitable, stumbled into the red. It turned out that Schrempp had publicly called Daimlers purchase of Chrysler a merger of equals only to mollify the Chrysler side. He had always intended it to be an acquisition.
Morale, and the companys stock price, tanked. Calls to unwind the acquisition could be heard loud and clear, from Michigan to Stuttgart.
Meanwhile, Schrempp looked to Asia for the next piece of his global puzzle. He first considered then-struggling Nissan (nasdaq: NSANY - news - people ), but instead turned to Mitsubishi. While Renault snapped up Nissan and made it the most profitable automaker in the world, Schrempp sank $3 billion into Mitsubishi, only to see the company nearly collapse and his investment evaporate.
Back at home, the companys flagship brand, Mercedes-Benz, was suffering alarming lapses in quality, and profits were beginning to dry up. A mini-car brand called Smart produced colorful, charming and staggeringly unprofitable little vehicles that could fit in the tiniest of European parking spaces. Mercedes is somewhat profitable again, but Smart wont be profitable until 2007.
The companys vast commercial vehicles division (DaimlerChrysler is the worlds biggest producer of heavy trucks, with brands like Freightliner, Sterling and Western Star) paid for foolish sales incentives in the late-1990s, with big losses in the early 2000s.
Yet Schrempp hung on, able, somehow, to convince his board and investors that despite his stumbles, his strategy was a good one. Remarkably, even after his board voted last yearagainst his wishesto suspend investment in Mitsubishi, effectively killing his three-market hopes, the board still kept Schrempp in the chairmans seat.
Now, at last, Schrempps vision is in the hands of a capable operator. When the Chrysler acquisition was near a breaking point in late 2000, Schrempp made one of his best moves: He dispatched Dieter Zetsche to Auburn Hills, Mich., to run Chrysler.
The mood in Michigan was poisonous. You mean the Germans are going to come run our American car company? This wasnt just any German, though. Dieter Zetsche charmed the grimaces right off the faces of the American workers within a matter of months, even as he announced a painful, $8.1 billion restructuring plan that would cost 26,000 jobs.
Zetsche set out to work on the revenue side of the businessbuilding and selling exciting cars and trucks that people would actually want to buy. And he had a deputy, Wolfgang Bernhard, now with Volkswagen, to attack costs. Together they turned Chrysler back to profitability by slashing operating and parts costs and building cars like the in-your-face 300 and minivans with a clever seat-storage system.
Zetsche will now leave the Chrysler group in the hands of Thomas W. LaSorda, the former manufacturing chief. LaSorda is in some ways like his boss Zetscheboth have a refreshing, almost goofy sense of humor, and both relish the nuts-and-bolts dirty work of running a carmaker.
And Zetsche will return to Germany where he will try to succeed where Schrempp never quite couldmaking the far-flung, patchwork operations of DaimlerChrysler hum the sameprofitable and innovativetune.
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Not surprising.
Big fat salary. Big fat pension. Big, fancy cars without any garage hassles. Running a prestigious car maker. Major corporate problems and not being fired.
DAS
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