Schremff Mffed ; DaimlerChrysler Names New Head of Sales for Mercedes

March 16, 2005; Bloomberg reported that DaimlerChrysler AG, the world's largest maker of luxury vehicles, said it will replace Joachim Schmidt as sales and marketing chief of the Mercedes Car Group after the division's revenue and profit declined.

Klaus Maier, 51, head of the company's truck unit in Europe and Latin America, will take over on April 1 from Schmidt, 56, who soon will be given another top position at DaimlerChrysler, the Stuttgart, Germany-based company said today in a faxed statement. Schmidt has held his current post since November 1999.

Eckhard Cordes, who took over in October as chief executive officer of Mercedes Car Group, plans to cut 4 billion euros ($5.4 billion) in costs through 2007 and boost profit and revenue. He eliminated 16,000 jobs in his previous role as head of the commercial vehicle division to counter declining demand for heavy trucks.

``This is about getting some fresh blood into sales and marketing,'' said Marc-Rene Tonn, an analyst at M.M. Warburg in Hamburg, who has a ``buy'' rating on DaimlerChrysler's stock.

DaimlerChrysler shares fell 1 euro, or 2.9 percent, to 33.87 euros in Frankfurt. The stock has declined 3.9 percent this year compared with a 3.1 percent increase at Bayerische Motoren Werke AG, the world's second-biggest luxury carmaker.

Cordes, 54, is now struggling with declining market share for Mercedes-Benz brand cars and losses at the Smart small-car business. Smart has racked up accumulated losses of about 2.5 billion euros since the company began selling the two-seater Smart ForTwo in 1998, according to analysts including Bankhaus Metzler's Juergen Pieper.

Mercedes Profit

Mercedes Car Group earnings before interest and tax plunged 97 percent to 20 million euros in the fourth quarter. The company has lost market share to smaller BMW in Germany and the U.S., Mercedes's two largest markets. Mercedes last year negotiated 500 million euros in savings with German workers.

``Cordes has a big task: to bring Mercedes to a profitability target of 7 percent,'' said Robert Heberger, an analyst at Merck Finck & Co. who has a ``hold'' rating on the company. ``He might change a few more things'' after replacing Schmidt.

Mercedes has been held back by an aging model lineup and sluggish growth in its main markets. European car sales fell 4.1 percent to 1.05 million vehicles in February as rising unemployment, higher fuel prices and stagnant economic growth discouraged consumers from making large purchases.

European Sales

DaimlerChrysler's sales in Europe last month fell 9.6 percent from a year earlier to 54,992 cars, led by a 16 percent drop at Mercedes-Benz. The company sells mainly Mercedes and Smart vehicles in the region. BMW sales soared 24 percent as dealers stocked up with the new midsize 3-Series, its most popular vehicle.

Mercedes has plunged in customer satisfaction surveys in Germany and the U.S., partly because of technical flaws. The world's largest luxury carmaker has also lost sales to Toyota Motor Corp.

German prosecutors in Stuttgart are investigating criminal breach of trust allegations related to the world's fifth-largest carmaker. The prosecutor's office investigating 11 people who are ``for the most part'' DaimlerChrysler employees, Tomke Beddies, a spokeswoman for the office, said March 14.

DaimlerChrysler last week said it fired two Mercedes Car Group executives and is investigating others about ``irregularities'' at the German sales division. Management board member Dieter Zetsche said at the time that the probe was of ``individual cases'' in which ``some people were a little bit confused about what is theirs and what is the company's.''