Zetsche Tightens Control on DC

February 5, 2006

Industry Report: Jan. 30, 2006 by TCC Team (1/30/2006)
Ford's Way Ahead, GM earnings, DC's job cuts at home.



Dieter Zetsche, DaimlerChrysler AG’s chief executive officer, continues to open up more space between his new administration and the reign of his predecessor Juergen Schrempp. Zetsche told a panel discussion sponsored by a Stuttgart newspaper that he had no problem with publishing the salaries of individual board members, according to Reuters.

Up until this year, German public corporations, unlike their counterparts in the U.S., were not required to publish the salaries of top executives. The disclosure law, however, has recently changed in Germany as part of a package of economic reforms and German corporations now have to disclose the salaries of members of a company’s board of management. “I don’t have a problem with it. I think it is right that it be published,” said Zetsche, who also recently announced the size of the board of management would be reduced from to nine members, from twelve.

German corporations, however, if they are so inclined, can move to ask shareholders not to disclose board of management salaries. DaimlerChrysler’s Stuttgart neighbor, Porsche AG, has succeeded in winning approval from shareholders for a proviso that keeps confidential the salaries of board members.

During the Schrempp era, however, the compensation of the chief executive, and the salary and perks of other top executives had become big issues among DaimlerChrysler’s critical shareholders. Critics maintained that Schrempp had installed an American-style pay system at DaimlerChrysler to the detriment of ordinary shareholders, who saw the value of their holdings decrease substantially during his tenure. 


The issue came to a head during last year’s annual shareholders meeting in Berlin, where irate shareholders accused Schrempp of financing a lavish lifestyle, including a new office in Munich, with corporate funds.

Thinning the ranks


A decision by Zetsche to disclose board salaries, which apparently has been finalized, could help defuse some of the tension in advance of the annual shareholders meeting in April. Zetsche has maintained the outline of Schrempp’s basic strategy, which has included focusing DaimlerChrysler’s assets in the automobile business, but he has also announced plans to thin down the bloated corporate structure that he inherited from Schrempp. Zetsche has already moved to eliminate more than 8000 jobs inside the Mercedes-Benz Group by the middle of this year and has announced plans to eliminate another 6000 administrative jobs inside DaimlerChrysler worldwide by 2008. He also has flattened out the corporate structure by saying he plans to fill the jobs of both DaimlerChrysler CEO and chief executive at Mercedes-Benz.

Zetsche has said the changes and cuts are needed for DaimlerChrysler to remain competitive.

Meanwhile, DaimlerChrysler spokesmen are denying reports that have surfaced in the German press that the company is thinking about spinning off the commercial vehicle group. “There are no plans for this,” a DaimlerChrysler spokesman told a German news agency after the German business magazine Focus carried a report about the possible spin-off.

Speculation about a spin-off was fed by Zetsche’s announcement last month that the commercial vehicle’s commercial van business was being turned over to Mercedes-Benz. The commercial vehicle group would concentrate on trucks and busses. One big barrier to a spin-off would be the use of the Mercedes-Benz brand name, which is widely used on heavy-duty trucks in Europe, Africa, and throughout Asia. DaimlerChrysler certainly would not want to give up the Mercedes-Benz name but any potential buyer would certainly demand access to the name and the three-pointed star, which is one of the most famous logos in merchandising history.

Zetsche also has said DaimlerChrysler would consider recruiting a partner for money-losing smart small-car division, but a final disposition on smart is not considered likely for several more months. 

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