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DaimlerChrysler CEO Schrempp to leave
Thursday July 28, 7:55 AM EDT
By Michael Shields, European Auto Correspondent
FRANKFURT (Reuters) - DaimlerChrysler's embattled Chief Executive Juergen Schrempp will leave at the end of the year, the carmaker said in a shock announcement on Thursday that eclipsed good earnings and sent its shares soaring.
Daimler said Schrempp, whom disgruntled investors accused at their annual meeting of poor performance and shoddy leadership, had volunteered to hand over the reins of the world's fifth-biggest automaker to Chrysler chief Dieter Zetsche.
The news boosted DaimlerChrysler's stock -- the laggard so far this year among European carmakers -- more than 10 percent. They traded at 39.87 euros at 1120 GMT, up 9.7 percent.
DaimlerChrysler debt rallied. Five-year credit default swaps on the company fell two basis points to 72 basis points, meaning it costs 72,000 euros a year to insure 10 million euros of the automaker's debt against default, a trader in London said.
Schrempp's leaving added some 3.7 billion euros to the firm's market value. The stock has underperformed sector peers by half since Daimler-Benz's 1998 merger with Chrysler, which Schrempp trumpeted as creating the first truly global carmaker.
"This is the day I've been waiting for," said JP Morgan automobiles analyst Philippe Houchois. "It's a wonderful day for the auto industry as a whole."
Chairman Hilmar Kopper said now was the best time for the CEO to go.
"The supervisory board and Prof. Schrempp are in full agreement that the end of the year 2005 is the optimal time for a change in the leadership of the company," Kopper said in a statement.
"The decisions of the supervisory board have been made unanimously after a thorough process," he said.
Although Schrempp's contract runs until 2008, he will only draw his salary until the end of this year, a spokesman said, insisting Schrempp had left voluntarily and not been forced out.
TALL IN THE SADDLE
The 60-year-old globetrotting German executive has worked at the group for 44 years, 17 of them as CEO.
Despite criticism, Schrempp had remained firmly in the saddle thanks to support from Kopper, labor unions and Deutsche Bank, which has a 10.4-percent stake.
Zetsche, 52, helped turn around the number-three U.S. automaker at a time of ferocious competition in North America. [Editor's note - the only reason Dieter Zetsche needed to "turn around" Chrysler is because Daimler abuse and mismanagement had screwed them up to begin with. -Duke] The German manager gets a five-year stint as group CEO. He is succeeded by Chrysler chief operating officer Thomas LaSorda.
Zetsche's track record at Chrysler inspires confidence, Sanford Bernstein analyst Stephen Cheetham wrote in a note to clients, keeping his "market perform" rating.
Still, "we do not believe his appointment materially changes our view of the company's normal earnings power, and the largest of sacred cows -- the group's value-destroying conglomerate structure -- is unlikely to be slaughtered near term."
Analysts said Zetsche was unlikely to divest Chrysler but questioned whether he would want to keep its 30 percent stake in Airbus parent EADS for the long term.
Schrempp's decision to build a carmaker with global reach led to the merger with Chrysler and its investment until last year in Japan's struggling Mitsubishi Motors Corp.
Both deals hurt profits and created management headaches while diverting attention from luxury division Mercedes Car Group. As head of Daimler's aerospace division, Schrempp also bought now-defunct Dutch aircraft maker Fokker.
MERCEDES SPRINGS SURPRISE
The group's second-quarter operating profit fell 20 percent to 1.67 billion euros ($2.02 billion), easily beating expectations thanks to a surprise operating profit at Mercedes.
Mercedes posted a 12 million operating profit despite an extra 311 million euros in charges to restructure Smart.
U.S. arm Chrysler, sucked into a North American price war with rivals General Motors and Ford, saw operating profit gain 4 percent to 544 million euros, also above analyst estimates of 412 million.
The group reiterated its forecast for slightly higher 2005 operating profit excluding restructuring costs for its loss-making Smart minicar brand.
Traditional cash cow Mercedes has been grappling with the strong euro, model changeovers, spending to fix quality problems and hefty losses at Smart. Its first-quarter operating loss of 954 million euros marked its first red ink since 1993.
The profit collapse prompted a new efficiency drive that aims to boost earnings at the division by up to 3.5 billion euros and restore an operating margin of 7 percent by 2007. (Additional reporting by Ralf Banser and Christiaan Hetzner in Frankfurt and Jane Barrett in Milan) ($1=.8287 Euro)
Thursday July 28, 7:55 AM EDT
By Michael Shields, European Auto Correspondent
FRANKFURT (Reuters) - DaimlerChrysler's embattled Chief Executive Juergen Schrempp will leave at the end of the year, the carmaker said in a shock announcement on Thursday that eclipsed good earnings and sent its shares soaring.
Daimler said Schrempp, whom disgruntled investors accused at their annual meeting of poor performance and shoddy leadership, had volunteered to hand over the reins of the world's fifth-biggest automaker to Chrysler chief Dieter Zetsche.
The news boosted DaimlerChrysler's stock -- the laggard so far this year among European carmakers -- more than 10 percent. They traded at 39.87 euros at 1120 GMT, up 9.7 percent.
DaimlerChrysler debt rallied. Five-year credit default swaps on the company fell two basis points to 72 basis points, meaning it costs 72,000 euros a year to insure 10 million euros of the automaker's debt against default, a trader in London said.
Schrempp's leaving added some 3.7 billion euros to the firm's market value. The stock has underperformed sector peers by half since Daimler-Benz's 1998 merger with Chrysler, which Schrempp trumpeted as creating the first truly global carmaker.
"This is the day I've been waiting for," said JP Morgan automobiles analyst Philippe Houchois. "It's a wonderful day for the auto industry as a whole."
Chairman Hilmar Kopper said now was the best time for the CEO to go.
"The supervisory board and Prof. Schrempp are in full agreement that the end of the year 2005 is the optimal time for a change in the leadership of the company," Kopper said in a statement.
"The decisions of the supervisory board have been made unanimously after a thorough process," he said.
Although Schrempp's contract runs until 2008, he will only draw his salary until the end of this year, a spokesman said, insisting Schrempp had left voluntarily and not been forced out.
TALL IN THE SADDLE
The 60-year-old globetrotting German executive has worked at the group for 44 years, 17 of them as CEO.
Despite criticism, Schrempp had remained firmly in the saddle thanks to support from Kopper, labor unions and Deutsche Bank, which has a 10.4-percent stake.
Zetsche, 52, helped turn around the number-three U.S. automaker at a time of ferocious competition in North America. [Editor's note - the only reason Dieter Zetsche needed to "turn around" Chrysler is because Daimler abuse and mismanagement had screwed them up to begin with. -Duke] The German manager gets a five-year stint as group CEO. He is succeeded by Chrysler chief operating officer Thomas LaSorda.
Zetsche's track record at Chrysler inspires confidence, Sanford Bernstein analyst Stephen Cheetham wrote in a note to clients, keeping his "market perform" rating.
Still, "we do not believe his appointment materially changes our view of the company's normal earnings power, and the largest of sacred cows -- the group's value-destroying conglomerate structure -- is unlikely to be slaughtered near term."
Analysts said Zetsche was unlikely to divest Chrysler but questioned whether he would want to keep its 30 percent stake in Airbus parent EADS for the long term.
Schrempp's decision to build a carmaker with global reach led to the merger with Chrysler and its investment until last year in Japan's struggling Mitsubishi Motors Corp.
Both deals hurt profits and created management headaches while diverting attention from luxury division Mercedes Car Group. As head of Daimler's aerospace division, Schrempp also bought now-defunct Dutch aircraft maker Fokker.
MERCEDES SPRINGS SURPRISE
The group's second-quarter operating profit fell 20 percent to 1.67 billion euros ($2.02 billion), easily beating expectations thanks to a surprise operating profit at Mercedes.
Mercedes posted a 12 million operating profit despite an extra 311 million euros in charges to restructure Smart.
U.S. arm Chrysler, sucked into a North American price war with rivals General Motors and Ford, saw operating profit gain 4 percent to 544 million euros, also above analyst estimates of 412 million.
The group reiterated its forecast for slightly higher 2005 operating profit excluding restructuring costs for its loss-making Smart minicar brand.
Traditional cash cow Mercedes has been grappling with the strong euro, model changeovers, spending to fix quality problems and hefty losses at Smart. Its first-quarter operating loss of 954 million euros marked its first red ink since 1993.
The profit collapse prompted a new efficiency drive that aims to boost earnings at the division by up to 3.5 billion euros and restore an operating margin of 7 percent by 2007. (Additional reporting by Ralf Banser and Christiaan Hetzner in Frankfurt and Jane Barrett in Milan) ($1=.8287 Euro)
None of that stuff could be further from the truth about me.
