DaimlerChrysler Chairman Juergen Schrempp is under pressure. While portraying himself as a champion of shareholder value, the company's stock price has been more than halved since early 1999.
The big problem, of course, has been the Chrysler group. He also must turn around struggling Mitsubishi Motors Corp.
Richard Johnson and Dorothee Ostle of Automotive News Europe interviewed Schrempp in Stuttgart on Oct. 25, before the company installed Dieter Zetsche as the new German head of the Chrysler group.
Why don't the financial markets understand what you are saying about synergies of the merger?
I think they want proof. Basically, every joint venture and every merger is, to a large extent, argued on synergies. The market will want to see proof, and they will see it as we go along already in 2000.
And people are a bit cautious when you have paper presentations and you say 'half a billion here, half a billion there.' I'm quite optimistic that in 2001 we will be able with hardware, with every bit, to convey the message as we go.
If you look at the savings, it's staggering. And this is only Mercedes and Chrysler. Now we obviously have a whole team working on the third leg, Mitsubishi. There are tremendous opportunities there.
I'm excited about the company. Everything that we have said about the merger, even in terms of first-year synergies - the money is there.
We hear noises from the suppliers that we're pushing too hard. Yes, we do, but we're doing it on the basis of partnership. On the basis of saying, 'Look, this is a tough market. We're in the incentive game, which means you are in the incentive game, because we're partners for life.'
You talked about the opportunities of Mitsubishi, but what about the risks? And what about the risks of Hyundai?
After almost 40 years in the company, I've seen a lot of ups and downs. I've been involved in a few things. I was part of the team solving the A-class problem. That was a major crisis. I know how to approach things. The maximum risk - but it is highly theoretical - would be that we lose the money that we paid for the 34 percent stake.
But nobody would ever tell me that the stock price would drop to zero. This is out of the question.
So we have the risk that, for a while, because of investments or the markets not coming back, we're not getting dividends for our 34 percent that fast. I think that is a risk we can take on the basis of the strength of this company.
One reason why we bought only 34 percent was that we didn't want to consolidate Mitsubishi on our balance sheet.
Asia is 25 percent of the world GDP (gross domestic product). I can assure you that 10 years from now, it will be 30 percent. There's no doubt. But we have presently in Asia only 2 or 3 percent of our revenues.
People occasionally tell me, 'OK, Schrempp, you're not the youngest any more. You could have a fantastic time if you would not do those deals.'
But just imagine not doing it and somebody comes back to me in 10 years - and 10 years is nothing turning around - and we still have 3 or 4 percent. Those markets would be growing 8 or 9 percent, while this market is growing 2 or 3 percent at the most.
At Hyundai the risks are basically zero because we've gone in with 10 percent. Hyundai is one of the most profitable automotive companies. There is no restructuring to be done. There are no additional costs. There is no management problem. We are investing in a profitable company with a market share in Korea of 70 percent.
But why do you need Hyundai?
Korea is the second-largest market in Asia on the car side. And we need that market. And the best way to get in that market is with a partner and on a basically zero-risk basis. So what's my risk?
On the truck side, we are the largest commercial vehicles manufacturer in the world but with no real presence in Asia. So it was vital for us to get it.
Will you send more people to Mitsubishi?
The new COO (Rolf Eckrodt) is unwinding Adtranz (DaimlerChrysler's rail equipment division that is being sold) in Berlin. He is in the loop. He (and Mitsubishi executives) have identified the posts together, and we have a list of 40 or 50 candidates.
At what level will these people go in?
We are talking about the two or three levels under the board. We are talking about senior people.
So product development, something like that?
Yes, product development or marketing - senior positions in various sections. We might need somebody for information technology, for example. That's presently being looked at.
If you move into a company and particularly with a management style like (Mitsubishi's), it is difficult. And if the guy at the top says we should do something and has to force it down (it doesn't happen easily).
Does Mitsubishi want this help?
It is wide open. They said, 'We need you. We want you. You are very welcome.' We get that also from government authorities. We get it from the union. And we get it from the very strong and powerful Mitsubishi group companies.
Is the way that Renault handled Nissan any kind of model for how you want to handle Mitsubishi?
We have an advantage because (Nissan President Carlos) Ghosn has been a bit of an icebreaker. We are obviously studying what is happening there. I have a feeling that Ghosn is doing a good job.
Will DaimlerChrysler take actions similar to the tough measures taken by Renault to fix Nissan?
Certain things - not all things. But you will appreciate that it is politically easier to do it once the ice is broken. The two companies (Nissan and Mitsubishi) are different. Their strengths and weaknesses are different. We might have to fill posts in different areas, but the principle will be the same.
Do you see Mercedes-Benz brand entering into new segments - below the A class, above the A class, below the C class?
Not below A class. Anything that is above A class, if there's some niche open, we would do. But we cannot see any niches open at the moment.
What about the off-roader segment?
We are in the off-roader segment.
Sure, but aren't you (Mercedes) very close to Jeep, and aren't you moving even closer to Jeep?
Jeep is positioned differently than, for example, the M class or the G-Wagen. This is the kind of thing we discuss in the automotive council and on the board: How do we position replacements when the replacements are due? Do we try to get them a bit further apart? Sometimes - not in this case, but sometimes - you might want to place two vehicles basically in the same segment - one at the low-cost end, with less technology. And you place in the same segment one, obviously, with a much higher price, with the latest technology.