Schrempp, Jürgen E. 1944–
Jürgen E. Schrempp
Chief executive officer, Daimler Chrysler
Born: September 15, 1944, in Freiburg, Germany.
Education: University of Applied Science, ME (mechanical engineering), 1967.
Family: Married Renate (maiden name unknown); married Lydia Deininger; children: three (first marriage, two; second marriage, one).
Career: Daimler-Benz auto dealer, 1960–1967, apprentice mechanic; Daimler-Benz, 1967–1974, sales representative; Mercedes-Benz subsidiary of Daimler-Benz, 1974–1982, customer services representative in South Africa; Euclid subsidiary of Daimler-Benz, 1982–1984, chief executive; Daimler-Benz, 1984, South Africa; 1985–1987, chief executive officer of South African operations; Deutsche Aerospace subsidiary of Daimler-Benz, 1987–1995, chief executive officer; Daimler-Benz, 1995–1999, chief executive officer; DaimlerChrysler, 1999–2000, co–chief executive officer; 2000–, chief executive officer.
Awards: Order of Good Hope, South Africa, 1999.
Address: DaimlerChrysler, Epplestrasse 225, 70546, Stuttgart, Germany; http://www.daimlerchrysler.com.
■ Jürgen Schrempp sought to be an important player on the world stage, and he hoped to change the course of history. As CEO of Daimler-Benz he tried to make his company and himself part of the new global economy that he thought was arriving in the late 1990s. Believing that the most successful companies of the future would transcend cultures and national boundaries, he strove to make sure that his corporation would not be left behind to be remembered only in histories. To keep Daimler-Benz strong, he chose to opt for a bold restructuring of the company and daring acquisitions that would make the company a universal presence throughout the world and a leader in every kind of auto manufacturing. Among his most important contributions to the automobile manufacturing business was his leadership in creating automobiles that were
not dependent on the internal combustion engine, which he believed might disappear as petroleum supplies were depleted.
Schrempp was a charismatic leader who enjoyed being the center of attention. He relied heavily on his magnetic personality to secure the loyalty of management and labor alike and to push forward his business initiatives. He was called "Neutron Jürgen" in the German press, an allusion to Neutron Jack Welch, who earned the nickname because, like a neutron bomb, he left buildings standing while eliminating personnel at General Electric. While head of Deutsche Aerospace, Schrempp had cut operations that were losing money, most notably Fokker, Holland's aerospace company, and while leader of Daimler-Benz he had cut subsidiaries, earning the "neutron" nickname. But the ruthlessness implied by his nickname was undeserved; he usually agonized over his decisions to cut jobs, often thinking not in terms of profits and losses but in terms of what would benefit workers and customers.
He was often compared to American business leaders because of his boldness. He wanted to change the world, and he was a German patriot who wanted Germany to remain a great economic power. Because of this vision, he often scorned such short-term concerns as stock market gains and losses to emphasize a long-term outlook that extended beyond his own lifetime. His insistence that Daimler-Benz research experimental power supplies, especially fuel cells, was part of his vision for the future. In the short term, these alternative power supplies represented financial losses for the company, but Schrempp hoped that over time they would keep his company strong and healthy as petroleum-powered vehicles became obsolete.
To secure his place in history and to secure a profitable future for Daimler-Benz and later DaimlerChrysler, Schrempp emphasized one of the traditions of Mercedes-Benz automobiles: technical excellence. Advanced technology and craftsmanship buoyed the companies' reputations and made the expensive Mercedes automobiles attractive to consumers. In sales, strong brand recognition and loyalty are important for long-term success. Schrempp worked hard to keep brand names such as Mercedes and corporate names such as Daimler prominent and distinct in the minds of the public. In Germany the name Daimler is especially important because it represents the inventor of an automobile that brought prestige to the country and represented German engineering excellence.
Schrempp's father was captured by the Soviet army in 1944 and held as a prisoner of war until 1949, when Schrempp was five years old. The family of two parents and three boys lived in a small apartment while the father earned a meager living administering college admissions tests at the University of Freiburg. At age 15 Schrempp dropped out of high school to take a job as an apprentice mechanic at a local Mercedes-Benz dealership. At age 20 he married his first wife, a high schooler named Renate, who recalled being overwhelmed by Schrempp's expansive personality. In 1964 Schrempp enrolled in the University of Applied Science at Offenburg, Germany, supporting himself and his wife not only by working as an auto mechanic but also by playing trumpet in a band at weddings and other events.
Upon receiving his mechanical engineering degree in 1967, he accepted a job offer to work as a sales representative for Mercedes-Benz, the most notable subsidiary of Daimler-Benz. Schrempp was an activist whose brilliant sales work was matched by his outspokenness on labor issues, which called him to the attention of the upper management of Mercedes-Benz. He was sent to South Africa not for punishment but for a chance to expand his corporate horizons by working in positions that were unavailable to him in Germany.
In South Africa, Schrempp drove hundreds of miles a day, visiting manufacturing plants, auto dealers, and consumers. He became the chief salesman for Mercedes-Benz's South African operations. During 1974–1982 he was an outspoken opponent of apartheid, the South African regime's policy of segregating races to keep whites as the social elite. For the South African operations of Mercedes-Benz, he advocated treating allraces equally in pay, benefits, and opportunities for advancement. So famous were his denunciations of apartheid that he came to the attention of the top management of Daimler-Benz, who selected him to head the operations of Euclid, a subsidiary that manufactured heavy trucks in Cleveland, Ohio, in the United States. When Schrempp and his wife looked up Cleveland on a map and saw that it was near one of the Great Lakes, they imagined it to be like Lake Geneva in Switzerland; however, when they arrived in Cleveland in 1982, it was winter, and the cold, ice, and snow were bitter beyond their experience.
It was a tough 1982–1984 for Schrempp, who had envisioned himself a builder of a business and a protector of the jobs of employees. Euclid was losing money because it had failed to find a niche in the North American truck market, and Schrempp presided over its slow dissolution and demise. His managing to end Euclid's operations with little fuss earned Schrempp a job in management in the Daimler-Benz South African operations, and he quickly became the CEO of Daim ler-Benz in South Africa. Social activists urged him to close down Daimler-Benz in South Africa, to withdraw as had Ford and General Motors in protest of apartheid. However, Schrempp resisted pressure to put an end to Daimler-Benz's presence in the country, insisting that Daimler-Benz would do more good by continuing to employ black Africans as well as other races. When the African National Congress (ANC), which resisted apartheid, demanded that Daimler-Benz with draw, Schrempp met with Nelson Mandela, the leader of the ANC, and received Mandela's endorsement of his efforts to treat all races equally. As president of a liberated South Africa, Mandela showed his thanks to Schrempp by awarding Schrempp South Africa's foremost civilian award, the Order of Good Hope, in 1999. Schrempp remained driven by a love for South Africa, where he eventually purchased an estate and where he vacationed whenever he could.
REMAKING DEUTSCHE AEROSPACE
Daimler-Benz was a vast corporation that owned much more than just Mercedes-Benz automobile manufacturing. One field in which it was prominent was aerospace technology. When Schrempp was named CEO of the Deutsche Aerospace subsidiary of Daimler-Benz in 1987, Deutsche Aerospace was losing money. It had long been a policy of Daimler-Benz to support Deutsche Aerospace with profits from other subsidiaries, and there was much reluctance on the Daimler-Benz governing board to cut jobs. A German governing board was required by law to have an equal number of members representing management and representing labor; Daimler had 12 for each side. The results of this system were slow responses to problems and a reluctance to make any members of the governing board unhappy by cutting jobs. Moreover, the strong sense of national pride in German corporations translated into the belief that cutting back companies was shameful and dishonorable not only to the corporation and its leaders but also to the nation.
Thus Schrempp struggled to keep Deutsche Aerospace afloat, even though it continued to lose money. The division that was losing the most money was Fokker Aircraft, a Dutch company that was acquired in 1993 by Daimler-Benz at Schrempp's urging. In 1995 the Dutch government refused to contribute $800 million to keep Fokker afloat for the short term, and Schrempp foresaw Fokker requiring $4 billion at the end of the year just to survive. To cease keeping Fokker afloat would have significant political implications. The company was a source of pride to Holland, and its failure would suggest that a German company had bought it just to put it out of business. After conferring with his close confidant Manfred Bischoff, Schrempp decided to eliminate the Fokker division and place the blame on himself. By taking the blame he helped to defuse the political repercussions and to persuade the governing board of Daimler-Benz to do as he wished. This strategy also produced the side effect of earning him the admiration of some members of the governing boards of Daimler-Benz and Deutsche Bank, the largest shareholder of Daimler-Benz. When Daimler-Benz CEO Edzard Reuter retired, the governing boards of both companies wanted a dynamic leader who had shown he had the intestinal fortitude to make the tough decisions required to return to profitability because Daimler-Benz was losing over $700 million in 1995. That year they chose Schrempp.
"A MERGING OF EQUALS" AND THE END OF CHRYSLER
Schrempp proved himself adept at persuading the governing board to approve his plans. He was energetic, eloquent, and charismatic, and his arguments were well researched and well organized. He went to few meetings without volumes of research, and he had a cosmopolitan view that gave him a better understanding of Daimler-Benz's role as a European corporation than most board members had. He tried to surround himself with people who shared his view of Daimler-Benz as more than a German entity, and he sought people who would think and act boldly to break from antiquated business practices. He relied on secrecy to help his initiatives succeed, making his decisions known to only a few close aides until they were almost at fruition, then springing them on the governing board and the public as nearly done deals.
Schrempp called Daimler-Benz headquarters in Stuttgart "Bullshit Castle" and tried to circumvent the multilayered management system that would take years to allow new ideas to percolate through its bureaucracy; in fact, he cut the number of top managers in half. Then he sold off several divisions, earning the nickname of "Neutron Jürgen." It was his view that leading by committee was foolish, and he wished to consolidate control of Daimler-Benz. Over the long term, he saw to it that allies replaced members of the governing board, a move that would prove crucial to his remaining CEO. He also wished to pull management of all divisions into the Stuttgart headquarters for greater efficiency and easier planning of cooperation among different divisions. Crucial to this plan was taking Mercedes-Benz, the crown jewel of Daimler-Benz and its most profitable division, into Schrempp's direct control. Until Schrempp became CEO of Daimler-Benz, Mercedes-Benz had been an autonomous corporation with Daimler-Benz acting as a holding company. Helmut Werner was CEO of Mercedes-Benz and was credited with keeping the division a big moneymaker, but Schrempp proved more adept at the politics of governance, managing to sway governing board members to his view that Werner should be fired and Mercedes-Benz merged fully into Daimler-Benz's hierarchy. When the vote came in 1997, the only member of the board to vote against Schrempp was Werner, and Werner was forced to resign.
In 1995 Daimler-Benz began "Project Blitz," a plan to take control of America's Chrysler automobile manufacturer, but it had stalled during Schrempp's period of consolidating power. With his usual secretiveness, Schrempp revived "Project Blitz" in 1997. He wanted to make Daimler-Benz a global power, and he saw acquiring Chrysler as an important step toward that goal. He asked his aides to conduct deep studies of foreign automobile manufacturers, with an eye to finding one that best complemented Daimler-Benz's automobile business; their studies favored Chrysler. Chrysler favored not only because it was an American company but also because it specialized midpriced cars and small trucks, which Mercedes-Benz did not. Chrysler had scored big successes with its Jeep Grand Cherokee and its minivans; in fact, it had been a big moneymaker throughout the 1990s up through 1997.
Schrempp made overtures to Robert Eaton, CEO of Chrysler. The two men became friends, making Schrempp's efforts easier. What Schrempp hoped to find at Chrysler was not only manufacturing success but also the personnel responsible for that success; he viewed Chrysler as run by people who shared his boldness of vision, who would be "cowboys" and aggressive in building business. Schrempp called the merger of Chrysler and Daimler-Benz a "merging of equals" repeatedly, although making Chrysler a division of Daimler-Benz seems to have been his plan all along. He would later admit in an interview that buying, not merging with, Chrysler had been his only plan; Daimler-Benz had to have control.
Daimler-Benz employed Schrempp's usual tactics of maintaining secrecy and revealing his real plans only when they had almost finished their objective. He even promised Eaton that the new corporate name would be ChryslerDaimler-Benz, only to insist with only a few hours before the deal was complete that he would back out of the deal if the name were not DaimlerChrysler. Further, he persuaded Chrysler's leadership to incorporate in Germany for tax purposes. As a result, the new company was DaimlerChrysler AG (Aktiengesellschaft ) and was governed by German laws. This move was catastrophic for Chrysler's management, who discovered that German incorporation meant control by a governing board under German rules and that they formed a minority on the board. By 1999 Schrempp had taken control of Chrysler, and he slowly put Germans in charge of Chrysler's operations, replacing American managers.
Schrempp's behavior was perceived as duplicity by many workers at Chrysler, and morale dropped. Further, the very Americans Schrempp wanted to keep refused to work for him. The aggressiveness he had admired in Chrysler was gone by the end of 1999, and so were Chrysler's profits as the company plunged into losses. DaimlerChrysler was the world's fifthlargest automobile manufacturer (after General Motors, Ford, Toyota, and Volkswagen), but the Chrysler division was being hammered by Toyota's new line of trucks, Ford's new minivans, and an assortment of all-terrain vehicles from Japan, and the new management team did not react aggressively. By mid-2000 DaimlerChrysler's stock had dropped 40 percent as Chrysler slid into confusion. Kirk Kerkorian, the largest private shareholder of DaimlerChrysler, lost $600 million as the stock dropped. In November 2000 he filed suit against Schrempp and DaimlerChrysler, claiming that Schrempp had lied when he promised a "merger of equals," instead planning all along to make Chrysler a subsidiary of Daimler-Benz. Two class action lawsuits were filed against DaimlerChrysler, one of which was settled out of court for about $300 million in August 2003. German journalists portrayed the lawsuits as merely products of litigation-crazy Americans, but many German shareholders demanded that Schrempp be fired.
DALLYING WITH HYUNDAI
Chrysler had briefly toyed with the idea of forming a bond with South Korea's Hyundai, and Schrempp used this possibility to distract from his next big venture. DaimlerChrysler bought 10 percent of Hyundai's stock and gave Hyundai and outsiders the impression that a deal for joint manufacture of trucks for Asia was in the works. This move made sense because DaimlerChrysler was the world leader in manufacturing trucks and would certainly want new markets for its successful brands. However, Schrempp was secretly dealing with Mitsubishi Motors. In March 2000 DaimlerChrysler purchased 37 percent of Mitsubishi's shares and told Hyundai that it would join with Mitsubishi and would expand into Southeast Asia.
THE ACQUISITION OF MITSUBISHI
In September 2000 DaimlerChrysler announced that it was taking over Mitsubishi. Mitsubishi president Katsuhiko Kawasoe resigned and was replaced by Rolf Eckrodt, who had been in charge of the dismantling of DaimlerChrysler's money-losing Adtranz railroad division. Schrempp wanted to add the manufacturing of small cars to DaimlerChrysler's line, and Mitsubishi had a full line of small vehicles. Mitsubishi was $13 billion in debt and would lose $600 million in 2000, but Schrempp hoped to use DaimlerChrysler's distribution system to market the small cars worldwide. A worldwide recession dampened sales.
THE WORLD'S WORST CEO?
By the end of 2003 DaimlerChrysler had $157 billion in assets and was a formidable corporation in spite of its troubles. One trouble was that Chrysler lost much of its American market share to Japanese imports. The Chrysler automobiles featured some parts from Mercedes-Benz and were mechanically sound, but Chrysler's once renowned marketing seemed to have left with its top management in 1999. It lost about $360 million in 2003. Mitsubishi was doing well in the United States, but it was losing its market share in Japan to Toyota, Honda, and the revamped Nissan. It lost over $400 million in 2003.
Further, Kerkorian's lawsuit finally went to trial in December 2003. In mid-February 2004, Schrempp took the stand for three days. He was caught contradicting himself on key issues, most notably whether he had lied about making Chrysler an equal partner in DaimlerChrysler or had planned all along to make Chrysler just a subsidiary. He said that he would have been happy to incorporate the new company in the United States but that it was incorporated in Germany because it would receive better tax breaks there. Later he admitted that he and Daimler-Benz would not have made any deal without making the new company a German AG, and he admitted that at all times it was his intention that Daimler run Chrysler. Under American law, shareholders of a company that is bought by another company must receive a premium on top of the value of their shares, but not if the merger is one ofequals. Schrempp's testimony could only be bad news for DaimlerChrysler because it implied that DaimlerChrysler would have to pay all former Chrysler shareholders additional money beyond the original $36 billion purchase.
On December 11, 2000, Newsweek called DaimlerChrysler "the worst-executed big takeover since God invented corporations." On December 18, 2000, Time International called Schrempp a "subpar" manager because by then DaimlerChrysler was worth less than Daimler-Benz alone had been in 1998. On January 12, 2004, BusinessWeek named Schrempp as one of the world's worst managers, citing the mismanagement of Chrysler and the losses DaimlerChrysler had suffered under his leadership. In the last week of February 2004, after Schrempp's testimony, the governing board of DaimlerChrysler delivered its own verdict by extending Schrempp's contract as CEO through 2008.
See also entries on Daimler-Benz AG and DaimlerChrysler AG in International Directory of Company Histories.
sources for further information
Edmondson, Gale, and Kathleen Kerwin, "Stalled: Was the Daimler-Chrysler Merger a Mistake? Many Say Yes—and Call for Schrempp's Head," BusinessWeek online, September 29, 2003, http://www.businessweek.com/magazine/content/03_39/b3851016_mz044.htm.
Schrempp, Jürgen E., "Thriving on Global Economic Changes: A European Review," Vital Speeches of the Day, March 1, 1997, pp. 306–309.
Taylor, Alex III, "Is The World Big Enough for Jürgen Schrempp?" Fortune, March 6, 2000, pp. 140–142.
Vlasic, Bill, and Bradley A. Stertz, Taken for a Ride: How Daimler-Benz Drove Off with Chrysler, New York: William Morrow (HarperCollins), 2000.
—Kirk H. Beetz