Schrempp, the Survivor?

To tighten his grip, he will centralize decision-making

It has been a disastrous run for DaimlerChrysler CEO Jurgen E. Schrempp: expected losses in the billions at Chrysler, a huge recall at DaimlerChrysler's partner, Mitsubishi Motors Corp., savage attacks in the usually respectful German press. Wrote a commentator recently in the weekly Die Zeit: "Should Daimler get rid of Chrysler--or Schrempp?"

Schrempp's not going anywhere for now. If anything, he plans to tighten his grip on his global auto empire in a bold attempt to turn this company around for good. On Feb. 23, Schrempp will present his comeback plan for DaimlerChrysler to the company's supervisory board. He is planning to take as much as a $2.5 billion write-off to cover the restructuring at Chrysler Group.

But the really interesting moves involve the executive suite and Schrempp's own tortured relationship with Chrysler headquarters in Auburn Hills, Mich. He plans to scrap the automotive and sales councils that Daimler Benz and Chrysler Corp. decided to set up after they merged in 1998. Instead, Schrempp will create a tightly knit executive auto committee headed by him and by Mercedes-Benz chief Jurgen Hubbert. The new committee will make all key strategic decisions and coordinate production and marketing across the group's divisions.

OLD HANDS. It will be an all-German club. Other members will include Daimler hands who helped Schrempp consolidate his power six years ago: Chrysler CEO Dieter Zetsche, commercial vehicles director Eckhard Cordes, Mitsubishi board member Manfred Bischoff, and corporate strategy director Rudiger Grube. The idea is to speed up decision-making on everything from overhauling assembly lines and laying off workers to sharing technologies and parts among Chrysler, Mercedes, and Mitsubishi.

Another power grab by the uber-boss? This time, it makes sense. True, the American absence in the inner circle will be painful to what's left of Chrysler's executive corps. But the only way to boost morale at Chrysler is to get it back on its feet. If the streamlined structure can turn Chrysler around, hurt feelings will fade.

Also, while Germans like Schrempp are portrayed as terribly aggressive, their problem to date has been in waiting too long to interfere with foreign subsidiaries. BMW left management of its Rover acquisition in British hands until the brand's value had deteriorated alarmingly.

Similarly, if investors want to fault Schrempp for anything, it should be for not stepping in and taking control of Chrysler much earlier. He even left an inexperienced North American executive in charge for nearly a year before bringing in Zetsche. So to analysts, setting up this committee is part of the same take-charge approach Schrempp has shown by sending Zetsche to fix Chrysler, and it's welcome.

Of course, Schremmp has yet to find the answer to the most perplexing question: Can anyone run a monster like DaimlerChrysler? No car merger of this kind has ever been tried, so there's no blueprint on the best way to run it. Diffuse decision-making certainly didn't do the trick. But Schrempp's central committee risks misreading certain markets and their special demands by making the decisions from too far away.

The committee will certainly have to get results fast. Schrempp has agreed to meet six-month performance targets, which could include anything from operating profit to productivity goals. If he misses those targets, the pressure will mount for his removal.

For the moment, Schrempp seems to have most of the supervisory board behind him. "Changing the CEO now would only create more upheaval," says one supervisory board member who represents labor. Curiously, despite all the turmoil, DaimlerChrysler's shares have risen 26% since the start of the year, making it among the best-performing stocks on the blue-chip EuroStoxx index. Some of the runup could be takeover speculation. But several analysts have also turned bullish since Schrempp signaled he will take tough action to restore Chrysler to profitability. "It seems the market's sentiment has turned," says auto analyst Jurgen Pieper at Metzler Bank in Frankfurt. Now, all eyes are on Schrempp and his committee. There's nothing like red ink to focus a CEO's mind.

By Christine Tierney in Frankfurt and Katharine Schmidt in Stuttgart

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