DaimlerChrysler’s second quarter operating profit dropped 20 percent, but chairman Juergen Schrempp found a foolproof way to juice the stock and investors’ appetite. He resigned. Investors responded by driving up the stock price almost 10 percent on the news to $48.26 on The New York Stock Exchange. Schrempp will be gone by the end of this year, probably to retire to his beloved second home in South Africa, and will be replaced by Chrysler CEO Dieter Zetsche.
Reaction in Stuttgart was akin to the munchkins in The Wizard of Oz seeing the Wicked Witch of the East under the house. One commentator on CNN International quipped that German beer stocks also gained because of the celebrations that were expected this weekend throughout Germany.
The words most often used to describe Schrempp tend to be “imperial” and “arrogant.” Fortune Magazine auto writer Alex Taylor III even used “bully” in his Thursday online story. Schrempp has been reviled for years among investors, analysts and many employees as he has dismissed critics frustrated with the company’s loss in market capitalization since acquiring Chrysler in 1998, underestimating the problems at Chrysler, botching the transition of ownership, leaving inept American management in place too long, letting Mercedes-Benz drift sink in quality as it over-invested in glitch-prone electronics, not being able to turn a profit at the Smart division and forcing Wolfgang Bernhard out of the company essentially because he was too vocal about problems at Mercedes-Benz and for not backing Schrempp’s investment in Mitsubishi. More recently, senior executives under his watch were forced out after they were charged with misappropriating funds, selling gray-market cars and having work done on their houses by company employees. Enough was enough even for this German supervisory board.
Among the media covering DaimlerChrysler, conversations around bars and auto shows frequently drifted to disbelief that Schrempp still had a job at all, something often chalked up to his relationship with the DaimlerChrysler supervisory board, and especially with Deutsche Bank. But the big German bank confirmed Thursday that it is selling up to 35 million of its shares in DaimlerChrysler AG, representing about a 3.5-percent stake in the company. The remaining stake of the bank in DaimlerChrysler will be at 6.9 percent and the bank is widely expected to sell that down in the future. With DB becoming less a factor in DaimlerChrysler, Schrempp, whose contract was to run through 2007, was losing his political cover.
Zetsche is the opposite of Schrempp in most ways. He is more coach than king in management style. He is respected on both sides of the pond. He made friends easily when he arrived at Chrysler in 2001 with a cloud hanging over him as he and Bernhard replaced American managers. A USA Today article in 2002 quoted industry maven Dr. David Cole saying about Zetsche’s reception at Chrysler after six months on the job: “They expected Adolf Hitler and they got Martin Luther.”
Schrempp will hardly be missed.