DaimlerChrysler CEO Schrempp to step down

updated 11:38 a.m. ET July 28, 2005

FRANKFURT, Germany - DaimlerChrysler CEO Juergen Schrempp, the architect of the 1998 merger that married Daimler-Benz to Chrysler, will leave the company by the end of the year and turn over the reins to Dieter Zetsche, now head of the U.S.-based Chrysler Group, the company said Thursday.

Zetsche will be replaced as Chrysler head by current No. 2 Thomas LaSorda at the start of 2006.

The news came as the company reported improved second-quarter earnings and a slight rise in sales.

The company also said that Eric Ridenour would take over for LaSorda.

The company that emerged from Schrempp’s 1998 attempt to create a global auto giant has struggled, first with heavy losses at the Chrysler division and now with weak earnings at its former cash cow, Mercedes.

Schrempp has been criticized by some investors because the company’s stock price has lagged since the merger. Comments he made about the deal in a newspaper interview also led to billionaire investor Kirk Kerkorian suing the company over the terms of the deal, a suit Kerkorian lost earlier this year.

Investors’ frustration with Schrempp was indicated by the nearly 10 percent rise in the company’s shares to $47.73 (39.81 euros) in Frankfurt trading after the announcement.

Zetsche has earned plaudits for his turnaround of Chrysler, which has bounced back on the strength of hot-selling new models such as the 300C.

Schrempp has been with DaimlerChrysler for 44 years, and held a variety of management positions, including the leadership of Daimler-Benz operations in South Africa, the United States and in Germany, as well as 17 years as chairman of Daimler-Benz Aerospace and DaimlerChrysler.

He began his career as an apprentice mechanic with Daimler-Benz in 1961 and joined the company’s headquarters in Stuttgart in 1967.

Also Thursday, DaimlerChrysler said its second-quarter earnings came to $884 million (737 million euros), or 88 U.S. cents (73 euro cents) a share, compared with 577 million euros, or 57 euro cents a share, a year earlier. Its operating profit fell 20 percent to 1.67 billion euros from 2.09 billion euros.

Biography of Juergen E. Schrempp BIRTH DATE: Sept. 15, 1944, in Freiburg, Germany EDUCATION: Mechanical Engineering degree from the University of Applied Science in Offenburg, Germany. EXPERIENCE: Joined Daimler-Benz AG as an apprentice mechanic in 1961; joined Stuttgart headquarters in 1967; became manager of Mercedes-Benz production in South Africa in 1974; board member of Mercedes-Benz of South Africa 1980-1982; president of Euclid Inc., a U.S.-based Daimler-Benz unit 1982-1984; president of Mercedes-Benz of South Africa 1985-1987; deputy board member of Daimler-Benz responsible for commercial vehicle sales 1987-1989; chief executive of Daimler-Benz Aerospace AG 1989-1995; chief executive of Daimler-Benz 1995-1998; co-chief executive of DaimlerChrysler AG along with Robert Eaton 1998-2000; chief executive of DaimlerChrysler since 2000. FAMILY: Married with a daughter and a son. Two sons from an earlier marriage. QUOTE: “Our tight focus on our global automotive business is now clearly defined. Our brand and product range, combined with our corporate presence in more than 200 countries, makes us very special indeed. Our results have shown steady improvement, and we are well on the track towards the achievement of targets set during my chairmanship.” Source: The Associated Press

Sales during the quarter were up slightly to $46.04 billion (38.4 billion euros) from 37.07 billion euros.

The earnings were helped by a strong performance from the truck and bus unit, which offset narrower profits in its luxury Mercedes Car Group unit.

The Mercedes unit posted a scant operating profit of $14.39 million (12 million euros) for the quarter, a 98 percent drop from 703 million euros in the same quarter last year. Revenue was $14.87 billion (12.4 billion euros), down 4 percent from 12.97 billion euros last year.

The company said the unit sold 308,100 cars, a 4 percent drop from last year that it blamed on few sales by its compact car business Smart. Last year, the unit sold 319,400 cars. In April, DaimlerChrysler announced a $1.44 billion (1.2 billion euro) restructuring of Smart that led to nearly 600 job cuts.

The company’s Chrysler Group, however, showed a 4 percent gain with operating profit rising to $652.26 million (544 million euros) from 521 million euros a year ago. Sales were down 1 percent to $15.62 billion (13.03 billion euros) from 13.2 billion euros.

The number of Chrysler cars sold rose 4 percent to 812,200 from 781,400.

Sales by the company’s commercial vehicles unit, which includes Portland, Ore.-based Freightliner LLC, helped push up that unit’s operating profit 12 percent to $628.28 million (524 million euros) on sales of $12.71 billion (10.6 billion euros), compared with 468 million euros on sales of 8.96 billion euros during the same quarter in 2004.

DaimlerChrysler said the number of trucks, buses and other commercial vehicles sold during the quarter rose 20 percent to 221,600 from 184,900 the year before.

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