A search for "DaimlerChrysler" as recently as mid-March 2004 on Ebscohost or other online industry news resources would reveal headlines such as "Schrempp strengthens grip on DC board," and "Bernhard moves up on DaimlerChrysler fast track," or even "DaimlerChrysler expected to increase stake in Mitsubishi." My, what a difference a few weeks can make.
The corporate fallout from the recent decision by the DaimlerChrysler board not to accept current CEO Juergen Schrempp's $3.8 billion dollar aid package for its struggling Asian partner Mitsubishi Motors (for which DC has a 37% interest) has indeed reached "snowball" status. I have been trying to post this article now for a full week, each day thinking I had everything together only to be faced with a new morning headline describing additional impending repercussions.
The most visible casualty of the board's decision has to be Wolfgang Bernhard (Chrysler Group COO) whose placement as successor to current Mercedes-Benz chief Juergen Hubbert was revoked. Touted by many as a godsend to the Chrysler brand and potential saviour to Mercedes-Benz (on the east side of the Atlantic, anyway), Bernhard's tough-love approach of cutting costs and bringing unfamiliar news that Mercedes-Benz needs to face (and make) some difficult decisions ruffled some feathers with the old-school brass in Germany who may harbour some ill-will to the merger and are known not to embrace drastic change. While this may appear to be a simple case of shooting the messenger to some, Bernhard is seeing considerable interest from GM, Ford, and VW already, validating his reputation as one of the industry's bright stars. (It should be noted that Wolfgang Bernhard was handpicked by Schrempp and was one of no less than eight board members opposed to Schrempp's proposed bailout.)
In addition to the unexpected availability of the Chrysler COO, there's the resignation of Mitsubishi's CEO and DC veteran Rolf Eckrodt under rather unfortunate circumstances effectively ending a 38-year career. After the 1998 "merger" with Chrysler, the 2000 Daimler strategy of globalization included minority stakes in both Mitsubishi and South Korea's Hyundai, neither of which performed. The decision not to throw good money after bad means Mitsubishi (which itself is floundering under $9 billion in debt) and Hyundai's shares will soon be up for sale, all but pulling the plug on Schrempp's plans and even leaving his foreseeable contract extension in question. DaimlerChrysler seems to be refocusing their Asian strategy on production in China now.
As if the management shake-up wasn't complicated enough, we are starting to see some of Bernhard's work at Chrysler bear fruit in the form of new models (notably Chrysler 300C, Dodge Magnum, and Convertible Crossfire), which are all receiving decent reviews. Score one for Wolfgang.
On the other hand, recent ISQ ratings from JD Power show a remarkable 20% increase in the quality of new Mercedes-Benz cars and the improved C-class, recently launched in Europe, has been very well received. Score two for the Brass.
In any case, there doesn't seem to be any question that the recent developments represent just another chapter in an unfinished story and that the legacy from the symbolic "Mitsubishi Decision" may reserve additional changes in management. I know if I were Manfred Gentz (CFO), Board member Bodo Uebber, or even Chrysler CEO Dieter Zetsche, I would be keeping my head down around the lunchroom. Stay tuned.
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