The
first time I met Juergen Schrempp was at an awards ceremony for MercedesBenz
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 DaimlerBenz AG and Chrysler 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 Bob Eaton to 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 Chrysler’s officers in the dark.
That was a critical mistake. Yes, secrecy was of
utmost importance, but Mr. Lutz had vast experience, having worked at General
Motors Corp., BMW AG, Ford 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, Daimler 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.