Commentary: Schrempp And Eaton Won't Fight At The Wheel

I first met Jurgen Schrempp, Daimler Benz's chief executive, in a makeshift meeting room at last fall's Frankfurt Auto Show. Schrempp was charged up: According to one of his bankers, he had just approached Chrysler Corp. about merging. To emphasize even a minor point, he would pound the table so hard that it jumped.

Schrempp is the last man you'd expect to share a top job. He's demanding, a tough-guy CEO. Skeptics think that bodes ill for DaimlerChrysler because the key to making the merger work is cooperation by the co-CEOs, Schrempp and Chrysler Corp.'s Robert J. Eaton.

But don't bet against this duo. Schrempp and Eaton may get along famously. The one to watch is Eaton, because he is a master of the New Age executive skill called "co-leadership." "Eaton's great skill is being able to submerge his own ego to get along with a difficult partner," says Warren Bennis, the leadership guru at the University of Southern California. "He knows the meaning of being a co-CEO."

It's a talent Bennis thinks could be in demand. The size and geographic spread of recent megamergers makes them hard for one leader to manage. Daimler and Chrysler are rooted in different cultural, legal, and financial systems. "It's a new sort of challenge," Bennis says. "We soon may be teaching co-leadership courses."

DEJA VU. Eaton is among the rare execs who have been through this drill. When he took Chrysler's helm in 1992, he replaced Lee A. Iacocca, one of the auto industry's great legends--and egos. Eaton came from bureaucratic General Motors Corp., and many execs feared he would manage strictly by the book.

There was speculation that Eaton would squabble with Robert A. Lutz, the ex-fighter pilot who was Iacocca's No.2--and whom many regarded as the key player in Chrysler's turnaround. Like Schrempp, the Swiss-born Lutz is macho. At 66, his hobby is tooling around in helicopters and a trainer version of a Czech-made fighter. He had a history of friction with other CEOs, and if Eaton had been autocratic, Lutz would have bolted fast.

Eaton, however, played that relationship brilliantly--making Lutz his co-CEO in deed if not in title. Eaton made a point of treating Lutz as an equal. At new-model introductions, it was always "Bob Lutz and I believe..." When reporters flocked around the outspoken Lutz, Eaton had the self-confidence not to feel upstaged. Rather, he found common ground with Lutz: a fondness for cigars, Eaton's warm memories of living in Switzerland as a GM exec, and a taste for fast driving. Far from feuding, the two became partners.

True, the situation is different this time: Titles aside, Eaton is clearly second banana. It's also true that no matter how well the merger works, Eaton will hold stock options worth $100 million or more. And as a lame-duck CEO--Eaton has announced he will retire in 2001--he may be hard-put to manage a staff that already shows signs of demoralization.

But there are signs, too, that Eaton and Schrempp are bonding. For one thing, their negotiations stayed secret to the end. In talks where two CEOs are competing for dominance, strategic leaks are common. For another, when it became clear that a co-CEO setup would not work indefinitely, Eaton volunteered to step down after three years. Then, Eaton says, Schrempp made the same offer. It was obvious that Eaton, 58, would have to leave before Schrempp, 53. But by making the first gesture, Eaton gave Schrempp an opening to reciprocate magnanimously. "The two of them have already proved they can get along through very intense negotiations," says Paul M. Achleitner, head of German operations for Goldman, Sachs & Co., Daimler's lead investment banker. "And believe me, they've thought through these issues."

This deal could still fall apart over egos. Only last year, Schrempp forced out Helmut Werner, head of Daimler's car operations, when Werner became too potent a rival. But Schrempp and Eaton know the merger's success hinges partly on their relationship. "For integration to occur deep down in an organization, there has to be integration at the top," notes Edward E. Lawler, a business professor at the University of Southern California. If ever an executive could ally with a CEO such as Schrempp, it's Bob Eaton.

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