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View Full Version : Mercedes Woes and Schremp


Naga Royal Guard
02-16-2005, 08:42 AM
<A HREF="http://www.autoextremist.com/page2.shtml#Rant" TARGET="_blank">http://www.autoextremist.com/page2.shtml#Rant</A><p>The One Constant Thread in DaimlerChrysler's Troubles Has To Go.<p>Detroit. In a stunning reversal of fortune, DaimlerChrysler's U.S.-based Chrysler Group is now the little engine that can for the formerly swaggering German conglomerate. Flush with hot-selling products and a cost structure that's finally under control, the Chrysler Group in nearby Auburn Hills is basically keeping the DaimlerChrysler Empire from imploding as you read this. As recently as 18 months ago, this scenario would have been inconceivable, and a year before that it would have been impossible, but now the Chrysler Group is carrying the ball for the proud company, as their German-based counterparts seem to be unable to right themselves from a self-induced tailspin that is getting worse, instead of better.<p>Dieter Zetsche and his troops deserve a large measure of credit for the latest Chrysler Group renaissance, but that has to be shared with Wolfgang Bernhard, who did much of the heavy lifting that got them to this point, before he was summarily dismissed after crossing swords with Juergen Schrempp, the imperious CEO of DaimlerChrysler, over Schrempp's desire to pump Mitsubishi with more cash, and over Bernhard's vision for what the Mercedes-Benz division, which he left Auburn Hills to take over, had to do in order to compete in the new automotive world that Mercedes had slowly, but surely, lost touch with.<p>Mercedes insiders were appalled, incensed and insulted at what Bernhard was so bluntly telling them - that they were operating in the automotive Dark Ages, and that if Mercedes didn't fundamentally alter the way they did business, they would be left in the dust by competitors who were doing a better job at delivering compelling luxury products with superior reliability and quality - and they were doing it with a cost structure that was growing more advantageous by the hour.<p>Mercedes-Benz executives bristled at what Bernhard was saying and chafed at his "take no prisoners" style. Schrempp used the Mitsubishi confrontation as an excuse to get rid of Bernhard, but at the end of the day, the conclusion to this short story was that Bernhard was right - and Schrempp and his minions were dead wrong.<p>Bernhard has gone on to be Number Two at VW, where he will have his work cut out for him and will have to put his considerable skills to the test. Meanwhile, Mercedes-Benz is floundering and bleeding money by the boatloads.<p>Even though Mercedes ended up doing almost everything Bernhard insisted they had to do after he left - they backed out of giving more money to Mitsubishi, they won concessions from the unions, they started to attack their quality issues and costs, and they started to get their arms around the fact that Mercedes-Benz as a brand was in deep trouble - it may be too little, too late.<p>How much trouble? Schrempp just recently broke the grim news to journalists that the Mercedes-Benz Car Group's operating profits were down almost 50 percent in 2004, and that the only bright spot for the overall company was the Chrysler Group's performance in the U.S. Not exactly what Schrempp's "vision" had in mind for the company when he orchestrated the buyout of Chrysler.<p>Not only that, it's deeply embarrassing and humiliating for Schrempp and his loyalists in Stuttgart to admit that their U.S. arm is outperforming the flagship German luxury brand, which is now clearly in a downward spiral.<p>You can assemble a long list of suspects who contributed to the decline of Mercedes-Benz, but in the end, it falls on one man's shoulders - and that man is Juergen Schrempp.<p><b>Under Schrempp's watch, Mercedes not only embarked on a disastrous march down market in the U.S. by pumping up the volume, it embraced a flawed cost cutting strategy that revolved around cheapening the pieces underneath the skin, instead of dealing with the fundamental cost structure issues that had had gone wildly out of control. This double whammy dramatically and immeasurably cheapened the brand's image. On top of that, Mercedes engineers flipped head over heels for electronics, dumping complicated systems and technologies into its cars that were unproven and problematic, destroying what was once a proud reputation for quality and reliability in just four years, which in the car business is literally overnight. Adding insult to absurdity, Mercedes-Benz now finds itself behind Chrysler in quality rankings, which is about as embarrassing and humiliating as it gets for an inbred culture that still believes it builds the best cars in the world.</b><p>And in the face of the burgeoning doomsday reality facing Mercedes, a reality that Wolfgang Bernhard so forcefully telegraphed, Schrempp has pressed on, either blissfully unaware of the consequences, or blinded by his own arrogance and unable to get it.<p>Now, Mercedes-Benz finds itself in an unfamiliar position, akin to an aging prize fighter who's punched out in the late rounds, trying to mount one last comeback, and yet Schrempp still believes that things will work out somehow, although he's unable to give financial analysts and investors any concrete evidence as to why - in order to relieve them of their growing concern.<p>Schrempp's hold on the all-powerful Deutsche Bank is legendary (DaimlerChrysler's mega investor), but I find it hard to believe that he has survived this long after being single-handedly responsible for running one of the greatest luxury brands in the world right into the ground. Any other executive in any other industry with the likes of Schrempp's dismal track record would have been fired years ago.<p>Schrempp's contract runs until the spring of 2008, but if DaimlerChrysler plans on being a force to be reckoned with in the automobile business in the foreseeable future, the one constant thread in their troubles has to go.

bolita
02-16-2005, 11:41 AM
Despite the extreme asseverations poured out in this article I agree with the content. Schremp screwed up and his ego blinded him along with the inner circle who I am sure say yes boss to evrything and if they dare to disagree... they're gone (just what happened to Bernhard).<p>In any case I would be surprised if Chrysler is once again spun off.... <IMG NAME="icon" SRC="http://www.germancarfans.com/images/forums/all_coholic.gif" BORDER="0">

CalinG7
02-16-2005, 01:01 PM
The article seems a bit exagerated, I mean c'mon, Mercedes has not bee run into the ground. But overall I've long believed that Schremp has done a lot of harm to this once proud company. The surprising thing is that his contract was recently extended, or re-confirmed, if I'm not mistaken. Can't imagine why, considering his many blunders.

Cozz
02-16-2005, 05:45 PM
Who's the idiot that writes this stuff? Yes, there are points in the article but the fact that MB lost about 50% profit wasn't because of Schremp. The cost of change overs and the Euro trade has hurt them a bit.<p>But yes, Schremp must go! The first gen ML was a disaster and it will take years to get over that. But all is not lost, the newer C-classes already has a better fit and finish then most Asian luxury cars. <IMG NAME="icon" SRC="http://images.zeroforum.com/smile/emthup.gif" BORDER="0">

bolita
02-17-2005, 08:43 AM
In any case if you all haven't read "Taken for a Ride" the book that comments on the inner happenings of the Chrysler take over you will find that the Chrysler deal and many other things that happen in DCX are masterminded by Schremp himself.<p>Forget about profits and quality just look at what he has cost in market value by the depreciation of the value of DCX shares. DCX now is valued much less than Daimler Benz was before the takeover.<p> <IMG NAME="icon" SRC="http://www.germancarfans.com/images/forums/scared.gif" BORDER="0"> <IMG NAME="icon" SRC="http://www.germancarfans.com/images/forums/scared.gif" BORDER="0">

Santeno
02-17-2005, 09:19 AM
True, but the problem hasn't been his leadership, so much as it has been the problematic integration of Chrysler and the mitsubishi debacle. Refusing to inetgrate Chrysler into the Mercedes technical and business units for a few years hurt them quite a bit. It's a case of gobbling up too much too fast and not being able to digest it properly. IMO, Things are changing for the better for most of DCX's brands (with the possible exception of Smart).

Roadster44
02-17-2005, 06:44 PM
I've read before the issues of MB making sub-car cars for sake of volume with concervative and bland styling. Which is going in footsteps of American car companies. <br>But guys I mean its never easy to keep on maintaining success. From the outside, its a lot easier to see mistakes company is making. That's why I believe its a good thing to restructure management smoothly and yet on a consistent basis.

velsatis
02-25-2005, 05:32 AM
I am a Mercedes Fan and being so I have been watching the progress of the brand over the year and with Mr. Schremp as president, it is certain that Mitsubishi was a mistake, Smart is still not doing well (too soon, brand still young and bilding it's line up, remember it started from scratch)<br>Now it is very easy to criticise the mistakes but when the steps where taken they where approved.<br>See Chrysler, it was suposed to be a failure but look at Chysler now, doing well and growing at a moment when both GM and Ford are strugling.<br>In my view the Schremp administration doens't deserve such a treatment after doing so much for the brand.<br>Yes, criticise the mistakes, but don't forget the good choices. I admire the personality whatever happens, maybe it is time to step down but if he doesn't....All my respect <IMG NAME="icon" SRC="http://www.germancarfans.com/images/forums/bow.gif" BORDER="0"> <p>Regards

Cozz
02-25-2005, 06:15 AM
Good point velsatis. I remember when the articles said that Chysler would be better off sold from the Germans. Now, the Chrysler group makes four times the profit vs. GM or Ford.

velsatis
02-25-2005, 06:20 AM
<TABLE WIDTH="90%" CELLSPACING=0 CELLPADDING=0 ALIGN=CENTER><TR><TD><i>Quote, originally posted by <b>Cozz</b> &raquo;</i></TD></TR><TR><TD CLASS="quote">Good point velsatis. I remember when the articles said that Chysler would be better off sold from the Germans. Now, the Chrysler group makes four times the profit vs. GM or Ford.</TD></TR></TABLE><p>I cannot help thanking you for your good word <IMG NAME="icon" SRC="http://www.germancarfans.com/images/forums/bow.gif" BORDER="0"> <p>Regards

CalinG7
02-25-2005, 01:18 PM
Lets seen now, Schremp took a brand that was the undisputed luxury, quality, desireability maker of the world and........... well.............. made it much the opposite. <p>Santeno said it wasn't his leadership that was the problem but the integration of Chrysler. Well, whose responsibility was it to integrate Chrysler smoothly. IMO it was Schremp's. He masterminded the deal to pay $36 billion for Chrysler (either bc he was a visionary or a megalomaniac) but then he really expected that either company would benefit by not integrating at all, by not sharing any parts?? That's what they said over and over, so what was the point. Now they had to backpedal and share, at least the things that aren't seen.<p>Also, he paid $36 billion without checking their books in detail. If he had, he would have seen the poor position they were in at the time, and should have been able to foresee that they were on the verge of huge losses. No, you can't see the future, but I think history proved that he had no clue what he was getting into when he paid $36 billion for a company that had no new product coming, attrocious cost structure, and many other problems. <p>Then he repeats his mistake with Mitsubishi. Almost the exact same mistake. A company on the verge of collapse, but somehow he failed to realise that again. <p>Smart, yes it's new, from the ground up, so I'll give Schremp some slack there. Who knows how that'll turn out, but as of right now, they're still losing money. 0 for 3 so far. <p>Then he starts taking the iconic Mercedes brand downmarket. Not only introducing tiny, FWD, hatchback/MPV A-classes, but cheapening interiors on all their cars. Built like a tank became built like cardboard. This is a toss-up, where the smaller cars might be appropriate for Europe but who konws if it does damage to the brand in the long-term. <p>The ML, was a brilliant move in many ways, creating the luxury midsize SUV explosion we see now. The execution, though, was attrocious. Once again, cheap interiors, and reliability were glaring problems, tarnishing the once proud brand. <p>Furthermore, a fascination with all things electronic, computerized, or technological blinded Schremp to the fact that maybe they weren't ready to be introduced in their cars, that maybe those things would just break down and cause more problems then they solved. <p>There's the now aborted (delayed??) link-up with Mclaren. Were the plans for Maybach realistic, achievable?? We could go on. So many mistakes, so many poor, rushed decisions, so many strategies that had to be scrapped. Overall, I believe Schremp, while not a total wash, had an overall negative effect on Mercedes-Benz. Any number of CEOs could have done a better, more thoughful job than he. He is definitely not a CEO to be admired.

Cozz
02-25-2005, 05:57 PM
CalinG7, one question. Where/who did the Germans give $36Billion to? It was an "equal merger" (sure) and they fired all of the Americans... it doesn't get any cheaper than that. You get all your money back and turn all the accounts in Euro.

taskbearer
02-25-2005, 09:19 PM
The mistakes of Juergen schrempp are clearly numerous, but if not for that merger Chrysler would not be where it is today. Yep mercedes quality has spiralled downwards, but still there are some strong cards for MB, most especially the perfect new SLK. <p>I really think the mercedes top brass were too imposing, causing the greatest engineering blunder that is the SLR, that carbonfibre car weighed just as much as a steel laden SL and its not nearly as comfortable. Their obsession with electronic essence spoilt what would have been a great supercar. They are also reluctant to produce smart the smart way which without all the cash absorbing thirdparty manufacturing style. thats why smarts costs so much.<p>All in all I'm rooting for Cordes, his current decisions on smart are well welcomed, and he probably would take MB back to the pent house. <br>

Chickpig
02-26-2005, 07:41 AM
Mercedes profits collapsed to just 12m in the final three months of 2004, the lowest level in the past decade, according to financial reports. City analysts fear that the once-bullet proof brand could actually swing into loss in the first part of 2005.<p>Mercedes is now paying the price, say commentators, for a decline in quality and reliability. The brand abandoned no-compromise engineering in the early 1990s as company chiefs embarked on a massive expansion of the model range that now stretches from the A-class to the Maybach limo. The firm is also struggling with Smart, which is still running up substantial losses.<p>Eckhard Cordes, boss of Mercedes automotive division, has insisted that the firms problems were mostly electrical, rather than more fundamental engineering problems. Its widely believed the maker has been damaged by vehicles such as the M-class off-roader and the previous-generation E-class, which have gained a reputation for unreliability.<p>Sales have been sliding recently, although 2005 and 2006 will see a burst of new models, including the R-class, M-class and new S-class.<p>Mercedes has also registered the GLK name, which is expected to feature on a BMW X3 rival based on the 4wd C-class.<p>source: autocar

velsatis
03-02-2005, 07:34 PM
The sales decrease in 2005 where already predicted since January 2003 in which it was told that due to lunching of the new line up the sales would go down. <br>Regarding the criticism to Mr. Schremp, go on, very easy to do...now<br>We cannot forget that the decisions aren't only taken by him, Pr. Jurgen Hupert ( I don't even see a mention to the name ) was untill begining 2005 President of Mercedes-benz Car Group and he as lead the revolution at Mercedes for the last years and with success he did so.

CalinG7
03-03-2005, 12:50 PM
<TABLE WIDTH="90%" CELLSPACING=0 CELLPADDING=0 ALIGN=CENTER><TR><TD><i>Quote, originally posted by <b>taskbearer</b> &raquo;</i></TD></TR><TR><TD CLASS="quote">The mistakes of Juergen schrempp are clearly numerous, but if not for that merger Chrysler would not be where it is today. Yep mercedes quality has spiralled downwards, but still there are some strong cards for MB, most especially the perfect new SLK. <br> <br></TD></TR></TABLE><p>Good point, and I agree, but that's not the issue here, is it. Chrysler could very well have had to file for Chapter 11 if Mercedes' deep pockets hadn't bailed them out, but the question here is whether Schremp is or isn't a good CEO. If rebuilding Chryslere came at the expense of Mercedes quality and reputation, which it seems it has, then I say, not, Schremp was not a good CEO. That's too big a blunder to pass over. <p>Cozz, that's a good question, and I don't have the answer. Since the articles I've read say Mercedes paid $36 billion for Chrysler, I always assumed they bought all the outstanding shares, but I could be wrong. Anyway, if Chrysler was worth $36 billion back then, it's worth $0.00 now. Under Schremp's watch, an asset that he bought for $36 billion is worth absolutely nothing now. I know it's a complicated issue but that's still $36 billion that somehow evaporated. <p>One of my points was that as a CEO, and one commiting his company to a $36 billion dollar deal, Schremp had the responsibility to do some intense due dilligence to see whether the company was really worth that much or if that price was just the result of irrational exuberance, a buble waiting to burst. In hindsight, it looks like Schremp committed Mercedes to a $36 billion bubble that burst fairly soon after he wrote the check.

62Lincoln
03-05-2005, 07:37 AM
One other key point to consider is how much market value Mercedes stock has lost under Schremp's watch. I don't have the numbers handy, but my recollection is that Mercedes stock has lost over half its value while he's been in charge. For my money, the CEO is ultimately responsible to the shareholders for increasing value, and he has been an absolutely abysmal failure in that regard.<p> <IMG NAME="icon" SRC="http://images.zeroforum.com/smile/emthdown.gif" BORDER="0">

rman5001
03-05-2005, 02:03 PM
<TABLE WIDTH="90%" CELLSPACING=0 CELLPADDING=0 ALIGN=CENTER><TR><TD><i>Quote, originally posted by <b>Cozz</b> &raquo;</i></TD></TR><TR><TD CLASS="quote">CalinG7, one question. Where/who did the Germans give $36Billion to? It was an "equal merger" (sure) and they fired all of the Americans... it doesn't get any cheaper than that. You get all your money back and turn all the accounts in Euro.</TD></TR></TABLE><p>Looking back at the news reports of the merger, and the way I read it (I could be wrong) I don't think this was a situation where cash ever changed hands. The $36 billion refers to valuation of Chrysler. (Of course they probably paid 10% of the deal or $3.6B to the bankers and probably another couple hundred million to lawyers)<p>With the consent of the Board of Directors of both companies, the stocks of both companies were dissolved and the shareholders received stock in the new DCX (at different ratios to reflect the value and outstanding shares of each company). I doubt even a successful company such as MB in the late 90s could raise that kind of capital without leveraging themselves to the hilt.<p>62Lincoln is correct in that the issue is the loss in value that the investors (i.e. real owners of DCX) have taken. Schremp may be responsible for running the company, but he is utlimately accountable to the shareholders.<p>IMO...this is the year that will determine Schremp's fate. I have no doubt that the board is already looking for successors, and if there aren't positive financial results, he will be gone. <p>Having "near perfect quality" is one thing that as enthusists such as us care about (and I have no doubt that MB has the talent and desire to return to its glory years in that respect.) The question is whether they can do that AND improve their profitability. (i.e. improve their operations and reduce their costs to coincide with the improved revenue from the new models)<p>The investors, especially large institutional investors (mutual funds, pension funds) who actually have enough stock to have their voices heard will want to a better return on assets or net margin.