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I Witnessed: The doomed DaimlerChrysler marriage
4 years ago
Eaton and Schrempp pose for the cameras
We now know just how unintentionally accurate a portent that was. Books such as Taken for a Ride, by Bill Vlasic and Bradley Stertz, show how quickly the deal started to unravel. My favourite story was told by a friend who worked for Chrysler. He said financial transparency only went so far, but one thing they did get from Stuttgart was some of the costings for the Mercedes E-Class.
‘We could see how much they were paying for seats and it was a lot, four or five times more than we were spending,’ he said. ‘So, some of the guys sent some seats from the Chrysler 300M to Germany with a note saying they thought Mercedes might be paying too much.’ Stuttgart engineers sent one seat to the safety testing laboratories and one to the accounts department. ‘Eventually we got a one-line reply,’ my friend recalls. ‘It just said, “No, we think you are paying too much”.’
The heavenly marriage turned out to be a euphemism worthy of Joseph Stalin. By March 2000, the now DaimlerChrysler boss Schrempp was boasting that the deal was actually a takeover and Chrysler boss Bob Eaton, who’d wept crocodile tears when announcing the deal to his executives, was sunning himself in Floridian retirement. A year after that, the combined share value of DaimlerChrysler was less than had been Daimler’s before the deal.
"Schrempp held on to the top job until August 2005, by which time he had presided over a disastrous fall in Mercedes quality and reliability as well as loss-making ventures with Mitsubishi and Smart"
Backed by powerful institutional investors, Schrempp held on to the top job until August 2005, by which time he had presided over a disastrous fall in Mercedes quality and reliability (only now being repaired) as well as loss-making ventures with Mitsubishi and Smart.
‘It’s funny how you don’t see jobs like that advertised,’ said my Chrysler friend when Schrempp was forced to resign. The day he left, DaimlerChrysler’s value rose by €40 a share.
In May 2007, Schrempp’s successor, former Chrysler boss Dieter Zetsche, was forced to sell one of the book-ends. The US private equity group Cerberus bought 80.1 per cent of Chrysler for $7.4 billion and Daimler walked away from the $18 billion healthcare liability that had scared its shareholders witless. In fact, Daimler didn’t even get the purchase price, because Cerberus ploughed most of it back into Chrysler and its financing arm as equity.
