Tensions build ahead of DaimlerChrysler AGM

5th April 2005, Comments 0 comments

5 April 2005, BERLIN - DaimlerChrysler shareholders are meeting in Berlin on Wednesday for what promises to be a stormy annual general meeting with group chief Juergen Schrempp likely to face investors' wrath over his management course and the fall in the transatlantic car giant's market value.

5 April 2005

BERLIN - DaimlerChrysler shareholders are meeting in Berlin on Wednesday for what promises to be a stormy annual general meeting with group chief Juergen Schrempp likely to face investors' wrath over his management course and the fall in the transatlantic car giant's market value.

Once dubbed 'Mr Shareholder Value', Schrempp will not only have to confront angry small shareholders when he takes to the podium in Berlin's convention centre, but also prepare himself for a lashing from leading investment funds with some having already signalled that they are considering opposing or abstaining on crucial votes at the meeting.

As a sign of the tensions that are likely to emerge, shareholders have lodged motions that are highly critical of Schrempp and his grand vision for forging a global carmaker with pillars in Europe, Asia and the US.

"Today we have before us the scrap heap of Schrempp's visions of a global corporation," said Juergen Graesslin from Freiburg in a motion submitted ahead of the meeting.

But what could be potentially more damaging for the 60-year-old Schrempp is that key investment funds such as Union Investment plan to abstain from endorsing the actions of the company's board, which is normally waved through the AGM.

German funds manager SEB is also planning to take a very critical stance at the meeting, saying that it still has not finally decided whether to ratify the board's action.

In the meantime, Deutsche Bank fund management offshoot DWS said it was not prepared to divulge how it intends to vote ahead of the meeting and fund managers Deka said it was still deciding how it planned to approach the meeting.

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.

Only 88.5 percent of those holding the group's share capital backed the board at last year's AGM compared to 99.4 percent in the previous year.

Schrempp, whose chief executive contract expires in 2008, was named as one of the world worst managers by Business Week last year.

But Schrempp is not alone among German chief executives who suddenly find themselves at the mercy of angry and more self- confident stockholders.

Only last week, the board of giant sportswear maker Puma found itself facing a shareholders' revolt.

Likewise, the board of Germany's second biggest bank, HVB AG is bracing itself for a turbulent AGM next month with chief executive Dieter Rampl's facing an uncertain future in the wake of the group's big write-offs.

A similar drama is also emerging at Deutsche Boerse, the operator of the Frankfurt Stock Exchange after its failed bid to takeover over the London bourse.

Meanwhile, the fate of Christoph Achenbach, the chief of KarstadtQuelle AG is also thought to be in the hands of stockholders as Germany's biggest department store struggles to remain on a profit path.

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.

But last year a boardroom rebellion forced Schrempp to abandon Mitsubishi and more recently, evidence has started to emerge that the Detroit-based group might have finally started to turn the corner.

Now the collapse of earnings at Mercedes-Benz and questions about the quality of the cars it produces has set alarm bells ringing among investors about the luxury car group.

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.

A DaimlerChrysler spokesman has already conceded that the recall will hit the group's earnings, in particular in the first quarter of this year with Mercedes Benz having watched its earnings slump as competition in the global car business has intensified.

In a position paper drawn up before Wednesday's AGM, Union Investment lashed out at the Mercedes group saying that the "quality fault had over the longer term cast a shadow over the value of the brand".

But in a bid to try to diffuse some of the criticism ahead of the shareholders meeting, DaimlerChrysler has unveiled a EUR 1.2 billion restructuring of its loss-making compact Smart small car division, which is also part of the Mercedes-Benz group.

At the same time, the group has been moving rapidly to revamp the Mercedes-Benz management with the weekend announcement of the appointment of Rainer Schmueckle as the luxury group's new chief operating officer.

DPA

Subject: German news

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