STUTTGART - The deepening crisis at the Chrysler group has put DaimlerChrysler Chairman Juergen Schrempp's job at risk.
The dismissal last week of Jim Holden, CEO of the Chrysler group, bought Schrempp some time. But DaimlerChrysler insiders say things need to improve quickly if the chairman is to survive. After Holden's firing, rumors spread in Germany last week that Schrempp also might be forced out.
'Everyone is calling me with this rumor,' said Peter Schmidt of industry research group AID Ltd. 'I don't think he is going to go in the next few months, nor do I think he deserves to. But the fuse is lit.'
The company said Friday, Nov. 17, that continued incentive spending, high inventories and production cuts will keep red ink flowing at the Chrysler group. Bloomberg News Service reported forecasts from analysts that the group's fourth-quarter loss could be as much as $85 million.
Both Moody's Investors Service and Standard & Poor's have said that they are considering cutting DaimlerChrysler AG's credit rating because of the problems in the Chrysler group. The Chrysler group posted a $512 million operating loss in the third quarter.
Schrempp also faces questions about the strategic wisdom of the company's 34 percent stake in troubled Mitsubishi Motors Corp.
Holden's ouster and replacement by Dieter Zetsche, head of DaimlerChrysler's Commercial Vehicles Division, was part of a strategy to restore profitability at the Chrysler group. But a DaimlerChrysler manager said it also was meant to 'send a signal to analysts that now finally Schrempp is hands-on. Whether this message is appreciated in the stock price remains to be seen.'
DaimlerChrysler shares have plummeted in value since the acquisition almost two years ago. The sharp decline has frustrated Schrempp, who often describes himself as a champion of shareholder value.
'Schrempp's future may not be so much in the hands of the supervisory board as the traditional Daimler-Benz small shareholder,' said analyst Schmidt.
'Instead of investing their life savings in pension funds, they put it all in Daimler-Benz shares. That is the cruncher,' he said. 'These people are very unhappy. There could be so much flak that the supervisory board has to do something.'
In a recent interview, Schrempp denied feeling pressure from the company's big shareholders, including Deutsche Bank, the Kuwaiti government and American businessman Kirk Kerkorian. 'They are very convinced that what we're doing is perfect, excellent and we have no doubt that our stock will appreciate,' he said in an Oct. 25 interview.
Company insiders say Schrempp feels the strain. Some critics even suspect that his instinct for self-preservation led to the decision to send Zetsche to the Chrysler group.
'Dieter Zetsche is the only serious competitor for eventually becoming Schrempp's successor,' said a senior DaimlerChrysler executive in Stuttgart. 'He could have become an easy option for the supervisory board if the main shareholders became fed up with Schrempp's performance.'
Dispatching the heir-apparent to America to sort out Chrysler's tough problems also 'gets him out of the direct view of the supervisory board,' said the executive.
However, if Zetsche succeeds in stopping the bleeding at the troubled Chrysler group he could become a very visible and attractive alternative to Schrempp.
Also last week, Schrempp moved an ally, Eckhard Cordes, into the top job at DaimlerChrysler's Commercial Vehicles Division, succeeding Zetsche. Cordes, management board member for corporate strategy, is often depicted as the mastermind behind the acquisition. Sources say he frequently has asked to be put in charge of an operating division.
'This job is a chance for Cordes and is designed to position him as an alternative to Zetsche for eventually succeeding Schrempp,' said a source close to the chairman. 'But a lot will depend on whether Zetsche can sort out the Chrysler mess, and whether Cordes' merger and acquisition strategy pays off in the long run.'
Another DaimlerChrysler source rejected speculation about Schrempp's motives. The source said: 'This is definitely not the time for strategic play. This is a major crisis; it is bloody serious. There is no room for tactical maneuvers.'