DaimlerChrysler boss Juergen Schrempp will face blistering criticism from investors during Wednesday’s annual general meeting, but analysts believe his job is safe for now, according to Reuters.
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The report said disgruntled shareholders attending the meeting in Berlin will be eager to lash out again at Schrempp for the loss of roughly €37 billion ($US45.58 billion) in market capitalisation since the merger with Chrysler in 1998.
Reuters said shareholders once again will pressure Schrempp for definitive steps to improve value and ask what the firm is going to do about its new problem child – its 37%-owned unit Mitsubishi Motors – which desperately needs cash to restructure.
But with major German fund managers like Union Investment already saying they will ratify management’s performance, analysts believe Schrempp won’t have anything serious to worry about, the news agency noted.
“Basically, the risk is virtually zero,” Metzler Bank analyst Juergen Pieper told Reuters, adding that at worst only about 1% to 2% of all shareholders would not approve performance.
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By GlobalDataLarge shareholders Deutsche Bank and the State of Kuwait, which together hold a combined 19% in Daimler, have most likely agreed to ratify management’s performance in advance of the AGM, so no surprises are expected, Pieper reportedly added.
Reuters said that continuing problems at DaimlerChrysler’s loss-making Chrysler unit have momentarily faded into the background, but only because Mitsubishi Motors has stolen the bad headlines.
Japan’s only unprofitable carmaker needs its large shareholders to inject anywhere upwards of 300 billion yen ($2.88 billion) in cash to fuel its new model development, cut debt and clean up its balance sheet and, should Daimler fully take part in the capital increase, it would siphon off more than €800 million ($985.4 million) in cash flow, depleting the Stuttgart-based giant of much needed resources for its own businesses, Reuters said.
The news agency added that, according to unconfirmed press reports, Daimler might even be forced to chip in more than half of the new capital needed.
Insiders have told Reuters, however, that Daimler fully intends to hold onto its stake – and possibly even increase it in the medium term – despite the current crisis.
The report said the saving grace for Mitsubishi remains the key role it plays in Daimler’s global strategy of sharing development and engineering costs with its other mass-market unit, Chrysler.
“Of course he’s going to be asked whether DaimlerChrysler is going to pull out of Mitsubishi and he’s going to repeat that that remains an option, but this is not the intended message,” a person familiar with Mitsubishi’s restructuring talks told Reuters.
“It’s a given that (Schrempp) wants to stay in – that’s no longer the discussion. The discussion now is about how to save Mitsubishi Motors, and debt restructuring is a big part of that, because that could open the way for Daimler to consolidate Mitsubishi,” the source, who declined to be named, reportedly added.
A DaimlerChrysler spokesman told Reuters over the weekend that the acquisition of a majority stake was possible, but that Mitsubishi would have to reach sustained profitability and significantly reduce its debts.
Nevertheless, Reuters added, investors won’t be pulling their punches when talking to Schrempp.
The news agency said Union Investment will show up at this year’s AGM to express their unhappiness with the share price performance and Deutsche Bank’s fund management arm DWS will even send its managing director Klaus Kaldemorgen to the meeting.
Institutional Shareholder Services, a proxy group that advises investors on corporate governance issues, reportedly said that while other factors contributed to the share price decline, the blame must be squarely placed on Schrempp’s team.
“The board must ultimately be held accountable for the systematic destruction of shareholder value,” ISS‘s Stanley Dubiel told Reuters.
