Chief of Chrysler is named to head DaimlerChrysler

DETROIT — DETROIT -- DaimlerChrysler AG's embattled Chairman Juergen E. Schrempp, who oversaw the 1998 merger that created the German-American automaker, said yesterday that he would step down at the end of the year.

He will be replaced by Dieter Zetsche, who has revived the sales and profits of the company's Chrysler division in nearly five years as its chief.


The surprise announcement, coinciding with DaimlerChrysler's second-quarter earnings report, follows continuing criticism of Schrempp's leadership and a contentious shareholder meeting in April as the combined company struggles to be consistently profitable.

The move will bring a substantial change in approach and style to the top of Daimler. While Schrempp, 60, has a brusque and supremely confident style that at times has created problems for the company, Zetsche, 52, is an affable executive who has largely won over American employees initially skeptical of the installation of a German at the top of Chrysler in 2000.


Thomas W. LaSorda, a Canadian who is currently Zetsche's deputy, will succeed him as chief executive of the Chrysler division. The ascension of LaSorda, 51, is noteworthy because he is the son and grandson of union leaders who once represented Chrysler workers.

Eric Ridenour, 47, will succeed LaSorda as Chrysler's chief operating officer. Ridenour currently is Chrysler's executive vice president of product development.

In a teleconference yesterday from DaimlerChrysler's headquarters in Stuttgart, Germany, Schrempp said, "We have played a decisive role in helping consolidate the global automotive industry. Clearly, DaimlerChrysler is not yet where it wants to be or where I know it will certainly arrive in the foreseeable future," he said. "Nevertheless, we have created the preconditions for success and I am confident we are heading in the right direction."

Investors welcomed Schrempp's decision. In Frankfurt trading yesterday, DaimlerChrysler's shares surged 11 percent. On the New York Stock Exchange, the company's shares closed up $4.29, or 9.8 percent, to $48.26.

Schrempp, who has worked at the company since he was 16, is the chairman of DaimlerChrysler's management board, a role equivalent to an American chief executive officer. Last year, he received a contract extension through 2008.

Asked if he had been approached by the company's supervisory board about stepping down early, or if he had initiated the discussions, Schrempp said: "We had been talking about it for a while. I am extremely proud we had no leaks. That was a masterpiece."

"In all seriousness," he added, "this is a process of thinking we did all together."

Schrempp has frequently come under fire as his vision of transforming the parent company of Mercedes-Benz into a robust global automaker has never fully clicked since 1998 merger of Daimler-Benz and Chrysler.


As Chrysler recovered in recent years, Mercedes began to struggle with quality problems and falling profits, and the company's Smart mini-car brand has been a trouble spot.

DaimlerChrysler's industrial alliance with Mitsubishi also unraveled this year amid a wave of scandals at the Japanese automaker.

The company's results show that DaimlerChrysler is still a work in progress. It reported an $892 million net profit in the second quarter, up 28 percent from the comparable period a year earlier, partly a result of lower income taxes. Operating profits, however, fell to $2 billion, from $2.5 billion a year earlier.

Excluding a charge for restructuring the company's struggling Smart mini-car brand, operating profits were $2.4 billion. Revenue grew 4 percent, to $46.5 billion.

Schrempp's most lasting legacy will be the combination of Daimler-Benz and Chrysler, a deal that has been an issue because many saw it from the start as more of a takeover of an American icon than the "merger of equals" that Schrempp claimed.

Those doubts were fueled by a 2000 interview with The Financial Times of London, in which Schrempp said he had used the term "merger of equals" only for "psychological" reasons. He described himself as a chess player, keeping his next moves secret.


"If I had gone out and said, 'Look, eventually Chrysler will be a division of the DaimlerChrysler Group,' everybody would have said, 'No way will we do a deal like that,' " Schrempp told the newspaper.

The remarks prompted a lawsuit from Kirk Kerkorian, the billionaire financier and former top Chrysler shareholder, and aroused the ire of Chrysler workers. Schrempp later visited Chrysler's headquarters in Auburn Hills, Mich., to address those concerns.

As he discussed his pending departure during yesterday's teleconference, Schrempp said: "I'm a very happy man about the decision, the timing, and the way the company goes, but after almost 45 years, you are emotional.

"By the way, I will be here until the end of the year, so I'm not leaving now. As far as Chrysler and the merger, we had our ups and downs, we always were loyal to each other. This was indeed a true merger."