DaimlerChrysler AG Chairman Juergen Schrempp says he was “coached” to used the term “merger of equals” to describe the combination of Chrysler Corp. and Daimler-Benz AG.

Schrempp also tells the U.S. District Court hearing the case brought against DC by investor Kirk Kerkorian’s Tracinda Corp. that it was former Chrysler Chairman Robert Eaton who prompted use of that term for “psychological reasons.”

“It is very important as a symbol. That’s what he said and…that’s what we did,” published reports quote Schrempp as saying on the stand.

Schrempp admits he avoided using the word “division” in describing Chrysler’s relationship in DC merger.

Schrempp says he wanted to avoid using the term “division” to describe Chrysler in order to prevent any morale problems within the Chrysler organization.

“If we would have gone and said Chrysler would have been a division, we would have had a tremendous problem with our people. The people would not have supported it,” he testifies.

Schrempp admits Chrysler has indeed become an integrated division of DC, like Mercedes and its commercial-truck operations.

“As a free-standing division, Chrysler would not derive the benefits from (being part) of DaimlerChrysler,” he says.

Asked by Tracinda’s lawyers if the current structure of DC proves the deal between the two auto giants was not a “merger of equals,” Schrempp responds: “This is a new company, DaimlerChrysler.”

Schrempp’s testimony comes days after Eaton appeared before the court, acknowledging the contract between Chrysler and Daimler-Benz did not dictate an equal split between American and German executives. (See related story: DC Merger Takes Center Stage)

“I assure you I would not have negotiated a transaction that left the corporate structure in place for perpetuity,” Eaton tells the court.

He says the merger was “the best thing” that could have happened to Chrysler, admitting the auto maker’s escalating losses could have forced Chrysler into “bankruptcy.”

Eaton, however, does say he was upset to read the story in the Financial Times in October 2000, in which Schrempp said he had always wanted Chrysler to be a division of DC. That interview is at the core of Tracinda’s case against DC.

Eaton says if the story had been published while the two auto makers were in negotiations towards a combination, “discussions would have stopped.”

Schrempp says he is pleased to be able to “put the facts before the judge,” adding he still believes the “merger of equals was fantastic.”

“I will go back to work now to try to help make DaimlerChrysler the No.1 automotive company,” he says in a prepared statement.

U.S. District Court Judge Joseph Farnan is expected to issue his ruling on the case next spring.