Schrempp Says DaimlerChrysler Is on Track

FRANKFURT, Germany David McHugh writing for the AP reported that DaimlerChrysler head Juergen Schrempp argued vigorously for his global strategy before restless shareholders Wednesday, saying the company was on track despite investor complaints over lagging earnings and trouble at Japanese partner Mitsubishi.

"No question - we are not where we want to be," Schrempp conceded in a speech to the company's annual meeting, held in a cavernous conference center in Berlin.

But he told several thousand shareholders, from suit-clad fund managers to retirees using wheelchairs and walkers, that "when it is tough, you can't run away and change a correct strategy."

Shareholders complain about continuing troubles at Chrysler and Mitsubishi, both part of Schrempp's vision of building a global automaker with a foot in all major markets and segments. Some argue that the company's shares have underperformed those of competitors such as BMW, which concentrated on the luxury segment.

Schrempp said the company was "keeping all options open" at Mitsubishi, where a troubleshooting team is working out a turnaround plan. There has been speculation DaimlerChrysler might have to make an expensive injection of new capital into debt-burdened Mitsubishi, in which it has a 37 percent stake.

He pointed to the company's success at its formerly unprofitable commercial vehicles business, which earned 393 million euros ($475 million) in the fourth quarter of last year, as an example of sticking with businesses that can be turned around.

Shareholders then took their turn, venting frustration over a share price that has fallen by more than half since the company was created by the landmark 1998 merger of Daimler-Benz and Chrysler Corp.

Schrempp's job appears secure for the moment, with the board expected to extend his contract later Wednesday until 2008. But the audience had bitter words for Schrempp and board chairman Hilmar Kopper.

"You have overdrawn your account of patience with shareholders," said Klaus Kaldemorgen, head of DWS Investments, a German investment fund.

Even in a difficult auto market, the company should have kept up with competitors, he said. "But at DaimlerChrysler this is not the case. While, for example, BMW shares have increased 49 percent in the last five years, DaimlerChrysler shares have lost 47 percent."

"You have had five years to convince shareholders of your strategy," he said, getting several bursts of applause. "Mistakes have been recognized too late ..."

"We fear that now the problematic developments at Chrysler and Mitsubishi Motors are weakening the basically sound Mercedes Car Group and can bring the entire company into danger."

On Wednesday, DaimlerChrysler shares changed hands at 35.31 euros ($42.72) in midday trading in Frankfurt. That is down from about 95 euros five years ago.

Thomas Meier, fund manager at Frankfurt-based Union Investment, which holds around 540 million euros ($648 million) in DaimlerChrysler stock, said he was "not satisfied with the long term development of the stock price."

Kopper, introducing Schrempp, drew boos when he said the company would continue not to disclose the individual salaries for top executives, but received applause when he said a new executive compensation plan would eliminate the use of stock options from 2005.

German companies aren't legally required to disclose individual salaries, although Germany's voluntary corporate governance code recommends that they do.

In addition to salary and bonus, longer-term compensation will now depend on the company matching the performance of other automakers in return on investment and return on sales.

Executives would have to use at least a quarter of this payout to buy company shares, which they must keep as long as they work for the company, Kopper said.