If you were a DaimlerChrysler board member, would you keep an executive like Mr. Schrempp, or would you exercise your fiduciary responsibility?
The first time I met Juergen Schrempp was at an awards ceremony for Mercedes-Benz engineers several years ago in Stuttgart. The place was jam-packed with media from all over the world clamoring to meet the company's charismatic chairman.
I begged for a brief on-camera interview with Mr. Schrempp for my television show, but his PR person kept pushing me off, claiming the chairman was too busy. I kept badgering him until he finally asked me what I wanted to ask the chairman about.
“Shareholder value,” I said.
In a flash, we were whisked in front of Mr. Schrempp. The moment he saw the cameras were on he launched into a passionate defense of shareholder value. It seemed this was a man who genuinely wanted to restructure Germany's greatest industrial corporation and generate wealth for its stakeholders.
That turned me into an eager believer in the promise of a merger between-Benz AG and Corp. Here was a business deal that promised to take Mercedes' dedication to quality, its thorough engineering practices and advanced technology and marry it to Chrysler's low-cost product development process, its creative designs and innovative Extended Enterprise. It would combine the best of both business cultures and emerge with something that was neither German nor American. It would produce the world's first true trans-national industrial corporation. It was exciting, it was bold, it was daring.
Today it's painfully obvious it's a total fiasco. Some say it was obvious this was a takeover from the beginning. But to me the seeds of destruction were sewn well before Mr. Schrempp came calling at Auburn Hills. It actually began a decade earlier when Lee Iacocca and Robert Lutz began to develop an intense personal dislike for one another. Proud to the point of arrogance, neither man would cede to the other in the most basic business decisions. It's one thing to stick to your guns, but pride cost Bob Lutz the chairmanship.
When Mr. Iacocca tapped Bobto run the company, the die was cast. Mr. Lutz and most of his team saw Mr. Eaton as a usurper. Worse still, they believed he lacked the business acumen to run the company. They tolerated his presence as chairman, but never accepted his leadership. Mr. Eaton, being no dummy, knew exactly how they felt. So when Mr. Schrempp came calling, he left Mr. Lutz and most of 's officers in the dark.
That was a critical mistake. Yes, secrecy was of utmost importance, but Mr. Lutz had vast experience, having worked atCorp., AG, Motor Co. and Chrysler. Moreover, he spoke fluent German and was better equipped than anyone else to understand the psyche and culture of the Daimler executives. He should have been an intimate player in the negotiations.
Leaderless, the rest of the Chrysler executives were at a disadvantage. None had overseas experience. They were a bunch of good Midwestern boys whose careers had not even come close to preparing them to deal with the real-politic machinations of a German multi-national conglomerate.
Meantime,had been preparing to merge with a major partner for years. It had detailed staff plans, contingency plans and position papers. It knew exactly how it wanted to put the two companies together, from top to bottom. Chrysler, meanwhile, had nowhere near that level of preparation. Besides, the company's modus operandi was to do things on the fly, with the least amount of committee work possible. That's what made it so nimble.
When the day of reckoning came, Daimler was ready to go. Since Chrysler didn't have detailed plans, it was forced to accept the German ones. That's when you first heard talk of a takeover, and that started a train of early retirements and defections. And when Tom Stallkamp was shoved out the door, all pretense of a merger evaporated.
In little more than a year, the merger shaved off the top layer of Chrysler's officer corps. No company can withstand that loss of experience and know-how, and with Chrysler now facing massive financial losses, we're seeing the results of that loss.
Incredibly, Mr. Schrempp publicly boasted that he never intended a merger of equals and that it was always going to be a takeover. Unless he has another hidden agenda that has yet to surface, that comes across as an incredibly stupid statement. For one thing, his takeover has already destroyed $40 billion to $60 billion in shareholder value. His admission of deceit has invited lawsuits that potentially threaten the company with billions in losses. And a takeover doesn't offer anywhere near the synergies that a merger does.
Now Mr. Schrempp has dispatched Dieter Zetsche to mop up the mess. He has his marching orders: cut cost fast. Good luck! The only way you can quickly pull billions in cost out of a company is by postponing future product, cutting capital investment and beating up your suppliers. While that may temporarily get you over the hump, it can cripple a company's long-term revival.
Mr. Schrempp should have devoted years of tireless energy into ensuring that Daimler and Chrysler were seamlessly meshed into one formidable company. Instead, the jewel he took over now teeters on the brink of catastrophe. Let me ask you: If you were a board member, would you keep an executive like this, or would you exercise your fiduciary responsibility?
— John McElroy is editorial director of Blue Sky Productions and producer of “Autoline Detroit” and “American Driver” for WTVS-Channel 56, Detroit.