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At DaimlerChrysler, a Change at the Top

Sabrina Fritz (jen)January 1, 2006

A plan that began with great fanfare in July is ending with barely a whisper. DaimlerChrysler's longtime leader Jürgen Schrempp is stepping down.

Looking to leave: Schrempp at an earlier news conferenceImage: AP

In July, DaimlerChrysler CEO Jürgen Schrempp made a surprising announcement: He would leave DaimlerChrysler, the company he has led for more than ten years. Now, on Jan. 1, he is being replaced by longtime DaimlerChrysler insider Dieter Zetsche.

The 61-year-old Schrempp made his entire career at the Stuttgart auto concern and spent the last decade at the head of the company. He oversaw the unexpected merger of Daimler and US automaker Chrysler in 1998.

Dieter Zetsche, fuer Chrysler zustaendiges Vorstandsmitglied der DaimlerChrysler AG
Schrempp's replacement, Dieter ZetscheImage: AP

Speculation raged in the press after Schrempp made the announcement he would step down, especially since he is leaving three years before his contract expires. Yet Schrempp said he is stepping down to spend more time with his second wife and their two young children and to take up other challenges. The board and Schrempp together decided the end of 2005 would be the optimal time for a change of leadership at the company.

Critics have blamed Schrempp for reacting too late to poor company decisions, and critical shareholders speak of a long-overdue change at the top.

Ein DaimlerChrysler Mitarbeiter hält im Mercedes-Werk in Sindelfingen (bei Stuttgart) am Mittwoch (09.02.2005) mit weißen Handschuhen einen Mercedes Stern in der Hand p178 Symbolfoto
Mercedes' famed hood ornamentImage: dpa

In the spring of 2004, board members began to revolt, asking Schrempp to renounce is activities with Mitsubishi, a tie that they thought was a mistake. When quality problems led to losses at the Mercedes division, shareholders said it was clear that Schrempp had lost touch with the most important brand. According to Auto Motor Sport magazine, Mercedes-Benz leads the list of company recall actions.

Shareholders anxious for change

Fallilng share prices also became a weak spot for the top manager. At the beginnig of his tenure, Schrempp announced shareholder value was a key prinicpal, but failed to significantly raise share prices, which have plodding along between 30 and 35 euros since the DaimlerChrysler merger.

The low-key Schrempp is being replaced by charismatic manager Dieter Zetsche. Zetsche, 52, once headed the Chrysler division but took over the reins at Mercedes after the surprise departure of its head, Eckhard Cordes, in September.

'Clean-up man'

Zetsche has been making de facto decisions for DaimlerChrysler for some time now. Schrempp hasn't been responsible for decision making at DaimlerChrysler since the beginning of 2005, observers say.

Zetsche, who studied electrical technology in Karlsruhe, is known as a "clean-up man" after his successful reorganization of Chrysler. Analysts say he is well equipped to bring new life to the company and its key Mercedes unit. He managed to cut 26,000 jobs and close down six factories while remaining highly respected by unions and workers.

Zetsche has said he plans to increase cooperation between the German and American parts of the company in order to cut costs.