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WILMINGTON, Del., Dec 10, 2003; Jon Hurdle writing for Reuters reported that DaimlerChrysler's chief executive acknowledged on Wednesday that he avoided calling Chrysler a "division" of the company formed by the 1998 Daimler-Chrysler merger because it would have played badly in the United States.

It was the first time since a now infamous newspaper interview in 2000 that CEO Juergen Schrempp has publicly acknowledged avoiding the term.

"When you go out and loosely say that Chrysler would become a division of DaimlerChrysler we would have had tremendous problems with our people," Schrempp said in U.S. district court in Wilmington, Delaware.

By "our people" the head of Germany's largest industrial company said he was referring to employees of Chrysler, long-considered a U.S. industrial icon.

"I believe it was right the way we did it," Schrempp added, conceding that plans to make Chrysler a division of the newly formed company were withheld while one of the biggest deals in automotive history was still being negotiated.

Schrempp, mastermind of the $36 billion deal, is accused of fraud by billionaire investor Kirk Kerkorian, who claims Germany's Daimler-Benz dishonestly characterized a takeover of the No. 3 U.S. automaker as a merger.

The distinction is key because shareholders are entitled to a "change of control" premium in takeovers as opposed to mergers.

Kerkorian, who owned nearly 14 percent of Chrysler and is seeking more than $1 billion in damages, contends that Schrempp and other Daimler executives lied about their intentions in order to lower the transaction price.

Kerkorian's case rests largely on The Financial Times interview in which Schrempp suggested the deal was only billed a merger of equals for "psychological reasons" and said he always intended to make Chrysler a "division" of the combined company.

Schrempp defended the remarks he made to the newspaper, saying he sought to stress that DaimlerChrysler, the world's fifth-largest automaker, was "an international, integrated automotive company" with two distinct operating divisions.

"MISCONCEPTION"

"We were worried that a misconception would appear," said Schrempp when asked why "divisions" had never been mentioned at the time of the merger.

"When we just say Chrysler would be a division the misconception is that the whole of Chrysler would be a division," he added.

Repeating comments made during his first day of testimony on Tuesday, Schrempp contended that from a corporate standpoint a merger of equals was exactly what took place five years ago. Operationally speaking, however, he said DaimlerChrysler is comprised of separate U.S. and German units.

"I never, ever intended to do anything else other than what we negotiated and is contained in the business combination agreement," Schrempp said, rejecting claims that he was guilty of any wrongdoing.

Numerous Americans have been replaced by German executives on DaimlerChrysler's top management team since 1998 -- a move that Kerkorian contends has underscored a creeping German "takeover" of Chrysler.

But Schrempp, who admitted the management team no longer reflects a merger of equals, said it was permissible to adjust "corporate governance provisions" after the merger.

Schrempp was to return to the witness stand for the third straight day on Thursday. U.S. District Judge Joseph Farnan is trying the case without a jury and the verdict may be months away.