Dieter Zetsche, who takes the stairs two at a time to save the seconds for work, will take over as chairman of DaimlerChrysler on Dec. 31 when Juergen Schrempp steps down.
Schrempp’s departure, welcomed by the stock market, comes as no great surprise. The reputation of the company’s flagship brand, Mercedes-Benz, has taken an extraordinary tumble in recent years because of quality problems that have hurt sales and seen Mercedes fall below companies like Hyundai in customer satisfaction surveys.
DaimlerChrysler is hoping that Zetsche, 52, can perform the same magic on the parent company that he did with its U.S. operation, where he was the man behind eye-popping hits like the Chrysler 300 and Dodge Magnum.
“[Zetsche] did amazing things at a time when it looked like Chrysler was going to be a giant black hole for Daimler,” said Jim Hall, vice president of industry analysis for AutoPacific, an automotive research and consulting firm.
“He did a great job focusing on new product at the same time he was addressing quality problems and creating synergies with Mercedes-Benz, the same issues he must focus on as head of DaimlerChrysler.”
The major task for Zetsche will be cleaning up the debris at Mercedes.
Chrysler Group chief operating officer Tom LaSorda, 51, will replace Zetsche as CEO and president, and Eric Ridenour, 46, executive vice president of product development, moves in for LaSorda.
The legacy of the departing Schrempp, 61, who began his career as an apprentice mechanic with Daimler-Benz in 1961, is as the architect of the deal that brought together the then-strong Daimler and then-weak Chrysler in 1998.
Shareholders in both Germany and the United States were puzzled and riled by the combination; the Germans thought Schrempp was squandering Daimler’s money while the Americans resented being taken over by a foreign company.
Though some suggest he was pushed out the door, Schrempp said he would stay until the end of the year, making the announcement after reporting second-quarter earnings Thursday. Once again, profits of the parent were propped up by Chrysler Group.
“There’s great happiness over his departure and celebration in the financial markets,” noted Dave Healy, analyst with Burnham Securities.
DaimlerChrysler stock closed up nearly 10 percent Thursday at $48.26 on the New York Stock Exchange, near the high end of its 52-week range.
“Schrempp was more of an empire builder than a manager and I don’t suspect his departure was voluntary,” Healy said. “There were a lot of disasters on his watch and the acquisition of Chrysler Corp. destroyed $40 billion worth of value in DaimlerBenz.”
Other miscues attributed to Schrempp were entering into a money-draining venture to build small Smart cars, and buying a larger stake in struggling Mitsubishi. Under his tenure, Mercedes-Benz endured a sharp decline in earnings.
Zetsche had his own detractors when he became CEO of Chrysler in 2000.
“The people at Auburn Hills initially didn’t like him,” said George Magliano, automotive research director for Global Insight, a Lexington, Mass., forecasting firm.
“The feeling was that Daimler was getting rid of him over there by sending him over here,” Magliano said. “Yet he had great management as well as people skills, turned the situation around in the United States, and now will help turn around DaimlerChrysler in Germany and people think he’s a good guy.”
“The best thing Schrempp ever did may prove to be sending Zetsche as the fireman to rescue Chrysler in the U.S.,” chimed in Healy. “He’s respected for leading the turnaround at Chrysler but now his primary job is to restore profits at Mercedes.”
Zetsche is familiar with Mercedes. He was on the board of management in charge of sales and marketing for Mercedes before a brief stint in the same post with commercial vehicles before joining Chrysler Group in 2000.
Chrysler was struggling when Zetsche arrived. In 2001, his first full year at the helm, the automaker lost $1.9 billion. In 2002, his second year, it earned $1.2 billion. And last year, in 2004, it earned $1.7 billion.
Analysts and industry observers point out that under Zetsche, Chrysler has not only made money, but it also has built better relations with customers, dealers, suppliers, the government, the union, employees and the financial community.
But product is where he has shined. He gambled successfully that a new family of rear-wheel-drive sedans–the Chrysler 300, Dodge Magnum and Dodge Charger–were what consumers wanted. And he used several Mercedes parts and components to build those cars at a profit. He capped that move by bringing back the powerful and revered Hemi (for hemispherical combustion chamber) V-8 from Dodge’s muscle-car days.
All this has put Chrysler back in the black even as the larger General Motors and Ford flounder. D/C second-quarter earnings rose to $892 million, or 88 cents a share, from $698 million, or 69 cents a share, a year earlier. Revenue was up to $46 billion from $44 billion.
Chrysler again led the way with earnings of $658 million in the quarter, up from $630 million a year earlier. Revenues were down a bit, to $15.7 billion from $15.9 billion, but that was attributed to a rise in the value of the Euro versus the U.S. dollar.
Mercedes-Benz posted a meager $15 million profit in the quarter, down from $850 million a year earlier.
While Chrysler Group sales rose to 812,200 units in the quarter from 781,000 a year ago, Mercedes’ sales slipped to 308,100 from 319,000.
Zetsche’s success has produced mixed reaction to LaSorda, who, most analysts say, has yet to prove himself.
“Lots of the cost-cutting, new model development and quality improvements came under Zetsche,” said Healy. “Now LaSorda has to prove himself. His strength is an unknown quantity.”
LaSorda arrived at Chrysler as senior vice president of powertrain manufacturing in 2000. He came from GM, where he was vice president of quality and reliability. He rose to chief operating officer in 2004.
“He was second-in-command behind Zetsche,” Hall said. “He understands manufacturing and dealing with the UAW. But most important, he understands it’s one thing to create a great car on paper, another to implement that car in production and move it out the door at a profit.”
But don’t look for major changes soon.
“In his [LaSorda’s] position, with things going well, you don’t precipitate change and add noise to the system, you don’t rock the boat and walk in and say, `Let’s shake things up and do things different,'” Hall said.
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jmateja@tribune.com
