The story is a example of what happens when a not so good leader creates huge over reach, and ultimately leading their company into the trash bin. Remind you of anything?

By CARTER DOUGHERTY, International Herald Tribune
Published: July 28, 2005



FRANKFURT, July 28 - DaimlerChrysler chief executive Jürgen Schrempp, who spearheaded the German-American merger of Daimler-Benz and Chrysler in 1998 but struggled to make the combination consistently profitable, will resign at the end of this year, the automaker said today.

He will be replaced by Dieter Zetsche, the German manager who engineered a turnaround at the company's Chrysler division, which sank deep into the red soon after the merger. Chrysler will now be headed by the American Tom LaSorda.

Hilmar Kopper, Daimler's supervisory board chairman, said in a statement the moment was "an optimal time for a change in the leadership of the company." Mr. Schrempp's departure comes on the heels of a second-quarter earnings announcement that highlighted problems that have now crept up in the luxury Mercedes division. It was met with enthusiasm in financial markets, where Mr. Schrempp has harvested bitter criticism over the parade of bad news coming from the automaker.

DaimlerChrysler stock soared 10.5 percent, or 3.82 euros, to 40.12 euros in Frankfurt trading, its highest level in two and a half years.

The Stuttgart-based company reported an increase in net income of 737 million euros, or $891.4 million, up from 577 million euros, or $697.9 million, in the same period a year earlier, on sales of 38.4 billion euros ($46.4 billion).

But pre-tax profits at the Mercedes group, which is grappling with slumping sales, persistent quality problems and a revamping of its Smart car division, plummeted from 703 million euros, or $850.2 million, in the second quarter of last year to 12 million euros ($14.5 million), the company reported. The division's revenue fell 4 percent during the quarter and expenses increased as the company sought to fix problems at Smart.

Quality problems with Mercedes peaked earlier in March when the company announced it would recall 1.3 million cars.

Highlighting the problems at DaimlerChrysler, the Mercedes brand lost ground to archrival BMW, which outperformed its larger competitor in quarterly sales this year, selling 109,600 vehicles compared with 97,500 at Mercedes.

The effort to get the Mercedes group back on track underscored the persistent failure of Mr. Schrempp, 60, to create a titanic vehicle manufacturer that could consistently fire on all cylinders and deliver better shareholder value than the company's German and American components could have separately.

Analysts also widely regard Mr. Schrempp's effort to buy into Asian carmakers Mitsubishi and Hyundai as expensive, but unsuccessful efforts to transform Mercedes-Benz from a peerless luxury car manufacturer into a truly global business.

"Under his stewardship the icon that was Mercedes-Benz has been devalued," Stephen Pope, an analyst at Cantor Fitzgerald in London, Bloomberg reported.

Mr. Schrempp, a native of the southern German town of Freiburg, began his career in 1961 at Daimler-Benz, working as a truck mechanic before further schooling led him to other positions, notably in South Africa in 1971, a country for which developed a lifelong affection.

By 1995 he had risen to the position of chief executive at the company's headquarters in the rolling hills of Germany's Swabia region, and three years later executed the "merger of equals," as it was called, that would define the rest of his tenure at the helm.

Chrysler appealed to Daimler-Benz for its geographic reach and cheaper car models, both of which Mr. Schrempp believed would fill out the German automaker's portfolio. At the same time, it offered potential cost-cutting synergies in areas customers never see, such as distribution and manufacturing.

But as difficulties at the various divisions illustrate, Mr. Schrempp could never coax an even performance out of a company that now had many more moving parts, even has he hung on as chief executive, in part thanks to a close relationship with Mr. Kopper, a former chief of Deutsche Bank.

By 2000, Chrysler was sinking deep into the red, and Mr. Schrempp turned to Mr. Zetsche, now 52, a trusted lieutenant from Stuttgart who has brought Chrysler back to profitability and will now succeed him at the top.

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