1999 Frankfurt Show: DC Goes Global Page 2

September 20, 1999

Chrysler Java concept 1999, Frankfurt Auto Show

That helps explain the $48 billion price tag for DaimlerChrysler’s new product offensive, which will bring 36 vehicles to market by late 2002, 64 by the end of 2004. Half the money will go for R&D, the rest to upgrade and possibly to build new plants. With annual volume on the Mercedes side now approaching 1 million units, it seems likely new assembly lines will be necessary, according to industry observers.

Risky new territory

DaimlerChrysler will venture into some risky new territory. Among other things, the company has announced plans to launch "series" production of a superclean, fuel-cell-powered car. And its all-new Maybach brand of ultraluxury sedans will be positioned above the current top-line $150,000 S600 sedan. At the other end of the spectrum, DaimlerChrysler announced in Frankfurt that it will add two more models — and possibly a third, a roadster — to its troubled SMART car lineup.

Measuring less than 10 feet from nose to tail, the original Smart coupe's introduction was delayed six months due to safety problems. Though sales have slowly picked up since it finally reached market, volume continues to run well short of the projected 120,000 a year. Making matters worse, SMART’s top executive, Lars Brorsen, announced his resignation a day before the Frankfurt show’s press days began. That prompted Hubbert, in a break from his prepared text, to insist that DaimlerChrysler remains "absolutely committed" to the brand.

SMART’s management troubles only underscored the turmoil within DaimlerChrysler ranks that surfaced when a number of mid- and senior-level executives — mostly Americans — began bailing out after the merger was completed last November. For his part, Eaton downplayed such problems as understandable when two big organizations come together.

"We’ve come a long, long way," he insisted, "further along than I would have expected."

Consolidation in Germany?

There are still plenty of issues yet to resolve, and there’s clearly a lot of internal debate underway. Hubbert, in an interview, insisted that, ultimately, DaimlerChrysler’s headquarters "has to be" consolidated to Stuttgart rather than split between Germany and Auburn Hills, Michigan. Both Eaton and his co-chairman, Juergen Schrempp, countered that the current arrangement will continue indefinitely.

Investors have reacted cautiously. DaimlerChrysler’s stock multiple of around 11 is better than Chrysler Corp.’s was, but well behind that of the old Daimler-Benz.

Meanwhile, competitors, such as Volkswagen AG, are reacting to DaimlerChrysler’s expansionist plans with new forays of their own. VW used Frankfurt to unveil the Concept-D prototype, which some in Germany have dubbed the "S-Class Killer," referring to Mercedes’ top models.

While the merger process may be running ahead of schedule, it’s clear DaimlerChrysler has plenty of challenges ahead of it. But with cars like Java and Maybach in the planning process, the German-American automaker intends to stake out its future by remaining on the offensive.

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