Reports: Chrysler Boss Out

AUBURN HILLS, Mich.--The Detroit Free Press is reporting that DaimlerChrysler’s American president and chief executive officer, James Holden, will quit Friday. A German, Dieter Zetsche, 47, head of Daimler’s commercial vehicle business, will replace him, according to the paper.

DaimlerChrysler’s board of directors is to meet Friday in Stuttgart, Germany and Auburn Hills to announce Holden’s resignation, the Free Press said.

Forbes magazine said that Holden’s departure “spells the end of American control of the financially troubled automaker. With it, Detroit’s Big Three has effectively become the Big Two.”

Holden, 49, has been president for just one year, but Chrysler’s fortunes have gone from bad to worse during his tenure, according the the magazine, in spite of record auto sales in the U.S. In October the Chrysler division posted a third-quarter loss of $512 million. Now analysts expect that Chrysler will fail to match even the diminished estimates laid out recently by the parent company. Meanwhile, earnings for the rest of the company have continued to rise, according to the magazine.

The company’s shares have fallen to $46.40 from a peak of $108 in January 1999. “At this price, the combined company is worth less than what Daimler-Benz was worth on its own--the value of Chrysler, in a sense, has gone down to zero,” Forbes contended.

The Chrysler division has seen a 14 percent drop in unit sales, and the company was forced to close factories in the U.S. and Canada for a week in October to cut inventories. While announcing the recent disappointing earnings, Holden said that he could not rule out layoffs as a cost-cutting measure. Some of Chrysler’s key products, such as the the Dodge Ram pickup and the Jeep Grand Cherokee, “are old or are facing increased competition. On the other hand, Chrysler’s retro PT Cruiser is the world’s hottest car

“But the mix of news was bad. DaimlerChrysler’s chairman, Juergen Schrempp, charged with cleaning up the mess, felt he had to act,” according to Forbes.

“Holden’s resignation is only the most recent. Many Chrysler executives have been forced into retirement since Daimler-Benz bought the company for $36 billion in 1998. Former Chrysler President Tom Stallkamp, manufacturing head Dennis Pawley, chief designer Thomas C. Gale and former Chairman Robert Eaton have all been shown the door.”

The deal between Daimler-Benz and Chrysler was originally heralded as a “merger of equals.” “But it became clear that some were more equal than others, and a week ago, Schrempp acknowledged the fact,” said Forbes.

Schrempp told the Financial Times of London that “if I had gone and said Chrysler would be a division, everybody on their side would have said, ‘There’s no way we’ll do a deal.’ But it’s precisely what I wanted to do.”

“Now, Schrempp is probably wishing he’d been more honest at the time and thereby avoided the acquisition altogether,” Forbes observed.

For more information contact www.forbes.com and www.freep.com.