DaimlerChrysler shareholders vent anger at CEO
6 April 2005, BERLIN - DaimlerChrysler's management came in for massive criticism from shareholders at the company's annual meeting on Wednesday in Berlin, with much of the ire targeted at the man held responsible for many of the carmaker's woes, chief executive Juergen Schrempp.
6 April 2005
BERLIN - DaimlerChrysler's management came in for massive criticism from shareholders at the company's annual meeting on Wednesday in Berlin, with much of the ire targeted at the man held responsible for many of the carmaker's woes, chief executive Juergen Schrempp.
The 60-year-old CEO appeared outwardly calm as he heard one shareholder and fund manager after another blast the drop in DaimlerChrysler's stock value and the quality problems at Mercedes- Benz.
In his speech, Schrempp acknowledged problems at Mercedes and the Smart car unit and promised forthright and effective action, but received only scant applause at the end. Then shareholders took the microphone and they didn't mince their words.
"It seems to have become part of the company culture at DaimlerChrysler to try to make results look pretty," said Klaus Kaldemorgen of Germany's largest portfolio manager DWS, a unit of Deutsche Bank.
He described Schrempp's remarks about Mercedes and Smart as a "bankruptcy declaration" and charged that the company in particular had been negligent about the image of Mercedes.
"Mercedes is no longer an icon," Kaldemorgen said.
Thomas Meier, of the Union Investment fund, pointed out that management in recent years had constantly had to revise its earnings projections and said Schrempp's outlook for 2005 to 2007 was "too uncertain".
"One has the impression that at least one cylinder is not firing properly," Meier said about the management mistakes at DaimlerChrysler. He particularly blasted the quality problems at Mercedes.
"If you demand a premium price then you have to deliver premium quality," Meier said, while producing the ultimate weapon by saying his fund would refuse to release management from its responsibilities on the 2004 business results.
Some 8,000 shareholders attended the AGM, with small-time investors also having their say. One man drew the largest applause when he called on Schrempp to say the words everyone wanted to hear: "I am resigning."
Schrempp, in his speech, admitted the company faced major problems with its luxury Mercedes car and the tiny Smart car, which would hurt 2005 earnings. He promised that the company's earnings will go on the rise again in 2006 amid cost-cutting efforts and new models.
He said the developments at the Smart division were "totally unacceptable" and revamping efforts would cost up to EUR 1.2 billion.
Regarding Mercedes, which has been hit by quality control problems and a drop in favour among the motoring public, he said the problems had to be dealt with comprehensively, generously and as quickly as possible.
The costs of this would be high, he admitted. But they would be an "investment in our most valuable commodity, the Mercedes-Benz brand", Schrempp said.
He said DaimlerChrysler's profits will show a clear upturn starting in 2006 as the company benefits from the effects of its 'CORE' programme to cut costs and from the introduction of new models.
But operating profits in 2005 would show only a slight rise from last year's EUR 5.8 billion amid the costs for revamping Smart, Schrempp cautioned. He estimated the Smart revamping would cost up to EUR 1.2 billion.
DaimlerChrysler's board and its shareholders have been on a collision course in recent years with the company's share price having almost halved since Schrempp oversaw the Stuttgart-based group's 1998 merger with US carmaker Chrysler.
In previous years, Schrempp was under attack as a result of the big losses run up by DaimlerChrysler's US Chrysler offshoot and its ailing Japanese partner, Mitsubishi Motors.
Now the collapse of earnings at Mercedes-Benz and questions about the quality of the cars it produces have set alarm bells ringing among investors.
Mercedes-Benz's earnings slumped by 97 percent to EUR 20 million in the fourth quarter of last year.
Once the jewel in the crown of the DaimlerChrysler empire, Mercedes Benz last week suffered another embarrassing blow when it was forced to recall 1.3 million cars worldwide, raising fresh doubts about the quality of its cars.
Subject: German news