Herr Schrempp Testifies at Chrysler Trial

WILMINGTON, Del. December 10, 2003; Randall Chase writing for AP reported that DaimlerChrysler AG chairman Juergen Schrempp testified Wednesday that comments he made three years ago about the merger of Daimler-Benz and Chrysler were misrepresented by the media, but that he made no effort to clarify them.

In a 2000 Financial Times interview, Schrempp said the deal was billed as a merger of equals "for psychological reasons" and described Chrysler as a "division" of Daimler.

Testifying in a lawsuit filed by Kirk Kerkorian, who claims Daimler-Benz falsely characterized a takeover as a merger, Schrempp said a Financial Times headline declaring that he never intended a "merger of equals" was "definitely not consistent to what I said."

Asked by Kerkorian attorney Terry Christensen whether he or anyone else at DaimlerChrysler asked for a retraction or clarification, Schrempp said he did not, even though he was "appalled" by the article.

Testifying in English, Schrempp said it was his experience that "if you try to do a correction ... that you actually make things worse."

Schrempp said there were internal discussions with Chrysler officials about the article, but he was unaware of requests from Michigan to get a clarification from the newspaper.

Anthony Cervone, head of internal communications for DaimlerChrysler, testified in a deposition that he was told by a German counterpart that the company stood by Schrempp's statements.

"I do not know to my knowledge that anybody said we are standing by (the statements)," Schrempp said.

Christensen noted that Schrempp gave another interview to Barron's barely a week later, but made no effort to address the confusion.

"You had a forum to go ahead and straighten all this out, just a week later, didn't you?" Christensen asked.

In the Barron's interview, Schrempp apparently made no mention of the earlier article, though he did address the merger question again.

"We said in spirit it was a merger of equals, but in our minds we knew how we wanted to structure the company, and today I have it," Schrempp was quoted as saying. "I have Daimler and I have divisions."

"Do you think that language straightens out the confusion resulting from the Financial Times article?" Christensen asked.

"I do not know if I said it that way," replied Schrempp, who explained that his interviews included "exaggerations" and figures of speech."

Kerkorian, whose Tracinda Corp. was the largest Chrysler shareholder at the time of the 1998 merger, claims Daimler-Benz avoided paying him an acquisition fee of up to 62 percent on his shares. He is suing for more than $1 billion in damages from DaimlerChrysler, claiming he and other Chrysler investors were duped.

Kerkorian did make $2.7 billion in other fees when the companies merged.

DaimlerChrysler maintains that Kerkorian supported the deal and grew disgruntled only when his shares lost value.

In earlier testimony, Schrempp said his comments to the Financial Times were an attempt to move beyond the merger and focus on addressing operational problems at Chrysler. Schrempp said he considered Chrysler an operating division of DaimlerChrysler, similar to the Mercedes car and truck divisions.

Had initial talk about combining the two corporations focused on Chrysler's status as an operating division, rather than as a partner in a merger of equals, Chrysler employees would not have supported the transaction, Schrempp said.

"What I'm saying here is that we shifted the emphasis of communication," Schrempp said during questioning by DaimlerChrysler attorney Tom Allingham.

Schrempp said that in the Financial Times interview, he was simply trying to assure the world that Daimler Chrysler was trying to a get a handle on the problems at Chrysler.

"The media and the world were talking about the merger not being successful, we had to tell the world what we were doing to handle the operating problems," Schrempp said.

"I never ever intended to do anything else but what was negotiated and contained in the business combination agreement," he added.

In his cross-examination, Christensen asked Schrempp about a second interview with the Financial Times in May 2002, in which Schrempp again did not address the earlier interview.

"Wasn't this a perfect time ... to set the record straight?" asked Christensen, who was to finish questioning Schrempp on Thursday.

Schrempp explained that he didn't think it appropriate to discuss the initial Times interview because of the pending lawsuit filed by Kerkorian.

Christensen also asked Schrempp about merger documents he said did not inform Chrysler shareholders that the 50- 50 split in corporate governance might be only temporary, or that the DaimlerChrysler supervisory board had the power to change the structure of the management board at any time.

Schrempp, noting nothing in the merger agreement or proxy documents sent to shareholders prohibited changing the management structure of DaimlerChrysler after the merger, said it was "plausible and reasonable" to expect that a company striving to be the leader in its industry would make changes over time.

"There is no language barring change of governance," Schrempp testified. "... This is a dynamic company that has to react to changing circumstances."