DaimlerChrysler boardcould settle CEO’s fate
29 April 2004
BERLIN – Just one week after DaimlerChrysler AG dramatically cut off a financial lifeline to Japan’s ailing Mitsubishi Motors, a meeting Thursday of the Stuttgart-based transatlantic car giant’s board could settle the fate of its chief executive, Juergen Schrempp.
But while DaimlerChrysler insisted that Schrempp’s future not on the agenda at Thursday’s board meeting in New York, German newspaper reports say that the 59 year-old chief executive offered to resign last week after a board revolt over his bid to secure additional financing for the troubled Japanese carmaker.
With Schrempp’s grand strategy for forging a Welt AG (World Inc) unravelling, Germany’s influential Frankfurter Allgemeine Zeitung reported Thursday that sources in Stuttgart said the supervisory board initially refused his offer, but would review the topic at Thursday’s meeting.
DaimlerChrysler, the world’s fifth biggest carmaker, said that board meeting was to consider a new Asian strategy after the group decided against further steps to bankroll Mitsubishi and rejected the newspaper’s account as inaccurate, insisting again the board had no plans to discuss Schrempp’s future. It said there was no truth whatever in the “speculation”.
The Frankfurter Allgemeine Zeitung also reported that Eckhard Cordes, chief of the group’s trucks and group global strategy chief Ruediger Grube also offered to stand down last week.
Already under pressure as a result of the massive losses run up by its troubled US Chrysler arm, DaimlerChrysler’s withdrawal from Mitsubishi’s planned YEN 700 billion (EUR 5.4 billion) bailout has thrown into doubt the wisdom of Schrempp’s policy of acquiring stakes in carmakers around the world to build an auto giant based on pillars in the US, Asia and Europe.
With Schrempp in China for a meeting of DaimlerChrysler’s international board, the company’s Chief Financial Officer Manfred Gentz was left to respond on Mitsubishi, which analysts also took as a sign of the chief executive’s weakened position.
Schrempp has not made any public comment since DaimlerChrysler said it was pulling out of Mitsubishi.
Schrempp received, however, some good news ahead of the New York meeting with DaimlerChrysler beating analysts forecasts by reporting Thursday a 10 percent rise in first-quarter operating profit to EUR 1.54 billion.
This was helped along by a solid performance by DaimlerChrysler’s trucks division and a strong rebound in the fortunes of Chrysler with the US group’s operating profit doubling to EUR 298 million.
Group sales, however, fell three percent and net profit dropped 33 percent to EUR 393 million after the company was forced to make a write down for losses resulting from its involvement in the debacle over Germany’s attempts to launch a new truck toll system.
Despite repeated calls from stockholders attending this month’s annual general meeting for Schrempp to stand aside, the company’s board extended his contract by another three years with employee representatives on the group’s powerful workers council this week endorsing his leadership.
Schrempp also defended the group’s global strategy at the AGM, telling shareholders: “When there is a problem with the operating business, then we don’t change the strategy, we fix it.”
But with the company share price underperforming key competitors such as BMW, the failure of Schrempp’s global plan to produce the promised jump in earnings has left him facing a string of stormy meetings of shareholders since the group’s 37 billion dollar merger with U.S. carmaker Chrysler Corp. in 1998.
Since the Chrysler merger, DaimlerChrysler’s market value has slumped by about EUR 40 billion.
This is the second time in a less than a decade that the German automaker has been forced to undergo a major overhaul of its key strategy with Schrempp moving swiftly to hive off businesses and to concentrate on the group’s core car manufacturing following his appointment as chief executive in 1995.
But in the wake of the DaimlerChrysler move to abandon Mitsubishi, signs have also emerged that the Stuttgart-based group’s alliance with South Korean-based Hyundai Motor Co Ltd is also in trouble.
This week Hyundai said it was holding talks on the possibility of reshaping its alliance with DaimlerChrysler, which holds a 10.5 percent stake in the South Korean car group.
In Asia, DaimlerChrysler retains a strong presence in China, however, Mitsubishi’s rivals – Nissan, Honda and Toyota – have been making big inroads into the US, Europe and in particular into the Stuttgart-based company’s domestic market of Germany.
Moreover, the company’s flagship Mercedes-Benz, which has been the company’s main prop though the recent turbulent years, has also been facing tough global competition.
In releasing its first-quarter data, DaimlerChrysler said that sales by its Mercedes car group fell nine per cent to 266,000 which the company put due to weak demand in major markets and the upcoming launch of the C-Class and the lifecycle-related decrease in unit sales for the M-Class.
Subject: German news