It's Showtime for Herr Schrempp

It wasn't supposed to turn out this way. In just two years, the biggest auto merger in history has become the biggest-ever auto repair job. On Feb. 26, DaimlerChrysler (DCX ) CEO Jurgen E. Schrempp unveiled a $3.9 billion restructuring of Chrysler Group, just hours after Daimler's Japanese partner, Mitsubishi Motors Corp., announced an overhaul of its own. The only piece of the far-flung automotive empire that's humming along is Mercedes-Benz, and its management is stretched to the hilt helping out the other brands. Investors have a right to feel frustrated. They would have been far better off today if Schrempp had skipped the buying binge. Daimler's stock has not recovered from its U.S. and Japanese merger mania.

When Daimler's German rival, BMW, choked on its merger with British carmaker Rover, it eventually dumped it. The result? BMW revived wonderfully. But Daimler can't dismember Schrempp's empire as easily, since both Chrysler and Mitsubishi are much bigger than Rover.

Chrysler is the most disappointing acquisition for Schrempp. In 1998, Daimler Benz was a money machine when it merged with Chrysler Corp. Today, it's not. Schrempp has laid out a plan to bring Chrysler back to profitability next year and generate big money for DaimlerChrysler in 2003. It's going to be tough--Daimler hasn't consolidated its management grip over Mitsubishi, and a hard landing in the U.S. could stall Chrysler's recovery.

Investors should hold Schrempp to his promises. He is, after all, the champion in Germany of shareholder value. They should give him a chance to fulfill his plan. Reward him if he succeeds, and tell him to leave if he does not.

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