In a move that surprised almost everyone, DaimlerChrysler AG on Thursday said CEO Juergen Schrempp, 60, would leave his position effective Dec. 31. He still had more than two years left on his contract. A company spokesman insisted that Schrempp is leaving voluntarily and has not been forced out.
On Thursday, Schrempp said in a conference call that he does not intend to seek a supervisory board seat when he steps down. He declined to say who first raised the subject of his departure.
Zetsche gets a five-year agreement to lead DaimlerChrysler. Chrysler COO Tom LaSorda 51, will succeed Zetsche, 52. Chryslers r&d chief, Eric Ridenour, 46, will replace LaSorda.
The news sent DaimlerChrysler stock soaring. DaimlerChryslers stock the laggard this year among European carmakers closed up 8.7 percent at 39.49 euros, or $47.87. DaimlerChrysler debt also rallied.
Schrempps announced departure added some 3.7 billion euros ($4.46 billion) to the automakers market value. DaimlerChryslers stock has lagged behind its automotive peers since the 1998 acquisition of Chrysler Corp.
"The supervisory board and Professor Schrempp are in full agreement that the end of the year 2005 is the optimal time for a change in the leadership of the company," said Hilmar Kopper, chairman of DaimlerChrysler AGs supervisory board. The decisions of the supervisory board have been made unanimously after a thorough process.
A company spokesman said Thursday that Schrempp has left voluntarily after a dialogue with the supervisory board.
Zetsche was seen as one of two DaimlerChrysler insiders most likely to succeed Schrempp.
Eckhard Cordes, the 54-year-old Schrempp acolyte who was named Mercedes-Benz AG chief last year, also was seen as a strong candidate, and many inside sources thought Cordes was the front-runner. Cordes is a longtime Schrempp ally who fixed the groups vast commercial-vehicle operations.
Some observers questioned whether Zetsche would become DaimlerChryslers next chief executive after he opposed Schrempps attempt last year to bail out ailing partner Mitsubishi Motors Corp. DaimlerChryslers board subsequently cut off further aid to Mitsubishi.
Zetsche was named Automotive News Industry Leader of the Year for 2005 and has been named the newspapers top North American CEO for two consecutive years.
A DaimlerChrysler spokesman said Thursday that Schrempp proposed Zetsche as his successor.
A 44-year Daimler employee, Schrempp has run the company since 1995. Schrempps desire to build a global automaker led to the Chrysler deal and to heavy investment until last year in struggling Mitsubishi.
Both deals hurt profits, alienated shareholders and diverted attention from Mercedes. Yet Schrempp remained firmly in power thanks to support from Kopper, labor unions and Deutsche Bank, which held a 10.4 percent stake in DaimlerChrysler.
Zetsches track record at Chrysler inspires confidence, said Sanford Bernstein analyst Stephen Cheetham in a note to clients.
Cheetham retained his market perform rating for DaimlerChrysler. But he questioned whether Zetsche could convert DaimlerChrysler into the powerhouse that investors once envisioned:
We do not believe his appointment materially changes our view of the companys normal earnings power, and the largest of sacred cows the groups value-destroying conglomerate structure is unlikely to be slaughtered near term.
The Chrysler groups second-quarter operating profit fell 20 percent to 1.67 billion euros ($2.02 billion), easily beating expectations thanks to a surprise operating profit at Mercedes.
Mercedes posted a 12 million euro operating profit despite a 311-million euro charge to restructure Smart.
Although Chrysler group was sucked into a North American price war with rivals General Motors and Ford Motor Co., its quarterly operating profit rose 4 percent to 544 million euros ($657 million).
DaimlerChrysler reiterated its forecast for a slightly higher operating profit for 2005, excluding restructuring costs for its unprofitable Smart minicar brand.
Reuters contributed to this report