Analysts say the departure of DaimlerChrysler chief executive Jürgen Schrempp marks the merciful end of a failed expansion strategy. The stock market greeted the announcement.
Schrempp, right, is handing over the reins to Zetsche, left
Jürgen Schrempp's exit does not exactly come as a surprise. The DaimlerChrysler CEO has faced intense criticism from analysts and shareholders for his ambitious strategy of international development.
"The supervisory board and Jürgen Schrempp agree that the end of 2005 would be the perfect time for a change in leadership," the DaimlerChrysler supervisory board said Thursday in a tersely-worded statement leaving out the usual words of thanks for the outgoing boss.
Hours later in another surprise development, the Web site Germany's Manager-Magazin reported that Mercedes boss Eckhard Cordes had asked the DaimlerChrysler supervisory board to dissolve his contract. The board had requested time to mull the issue, the magazine wrote, quoting "informed sources."
Cordes apparently cited the lack of complete support from the supervisory board for his difficult job of restructuring Mercedes as one reason for his wish to step down.
Schrempp "ruined a good brand"
Under Schrempp's leadership, Daimler acquired Chrysler only to see the company enter a serious downward spiral.
DaimlerChrysler's operating profit dropped, its Asian expansion scheme faltered with the addition of troubled Japanese manufacturer Mitsubishi Motors, and traditional cash cow Mercedes struggled with the strong euro, spending to fix quality problems and hefty losses at its Smart minicar brand.
On the news of Schrempp's departure, the company's stock had its biggest gain in three years, with the price of shares rising 8 percent in early trading on the Frankfurt stock exchange.
Analysts on Thursday said Schrempp's resignation was overdue.
"Schrempp took several wrong strategic decisions in the past," analyst Jürgen Pieper told Reuters. "Schrempp has disastrously failed in his plans to create a global car company," said a stockbroker. "He ruined a good brand with his acquisitions of Mitsubishi and even Chrysler."
A company spokesman said that Schrempp was leaving the world's fifth-largest carmaker of his own will and was not forced out.
"He has left voluntarily after a dialogue with the supervisory board," the spokesman said, adding that although Schrempp's contract runs until 2008, he will only draw his salary until the end of the year.
Schrempp, 60, will be replaced by Dieter Zetsche (photo), who helped return the US-based Chrysler division to profitability, the company said in a statement. Analyst Jürgen Pieper said Zetsche's appointment "will blow some fresh wind into DaimlerChrysler."
Apart from bringing in some much-needed dynamism, Zetsche's arrival is also expected to be a stabilizing factor.
Erich Klemm, head of the workers' council at DaimlerChrysler indicated Thursday that Zetsche would honor the agreements hammered out between the management and the workers' council and avoid layoffs linked to the company's performance.
Zetsche will be replaced by Thomas LaSorda as Chrysler's leader, with the changes taking effect at the start of 2006.
The news of Schrempp's resignation came as the company reported improved second-quarter earnings and a slight rise in sales.
Schrempp's history with DaimlerChrysler stretches back over 44 years, during which he held a variety of management positions, including the leadership of Daimler-Benz operations in South Africa, the United States and Germany as well as 17 years as chairman of Daimler-Benz Aerospace and DaimlerChrysler.
Schrempp began his career with the company in 1961 as an apprentice mechanic and joined the company's Stuttgart headquarters in 1967.