DaimlerChrysler has begun the hunt for a new chief of its Mercedes division as rumours swirled over the mounting leadership crisis at Germany’s flagship corporation, according to the Daily Telegraph.
Go deeper with GlobalData
The London-based paper said the troubles at Mercedes come after last week’s shock decision by Jürgen Schremmp to step down as head of DaimlerChrysler – ending a decade of ruinous foreign adventures and a Chrysler merger that resulted in billions of euros in losses and fallen share value.
The mystery surrounding Schremmp’s exit – voluntary or not – has prompted [politicians in] both Berlin and Brussels to intervene, demanding answers to quell “wild speculation”, the Telegraph’s report said.
The paper said the fall-out has rocked Stuttgart, where Eckhard Cordes, the present head of Mercedes, has offered to resign less than year after taking charge with ambitious plans to rescue the struggling brand.
The Daily Telegraph noted that Mercedes has lost almost €1billion (£690m) so far this year, led by a 30% slide in sales of E-class sedans – the firm has been pipped by BMW as the world’s leader in luxury cars, dropping to fourth place in America.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataCordes had been groomed for succession but was passed over in favour of Dieter Zetsche, credited with nursing Chrysler back to health, the report added.
According to the Daily Telegraph, Germany’s Handelsblatt newspaper accused Cordes of marching off in a sulk. “He’s behaving like a young child who’s had his toy taken away,” it said. Defenders say he has begun to stop the bleeding at Mercedes, after proving himself by reversing losses at the truck division.
The Telegraph said Mercedes marketing manager Klaus Meier is favourite to take over but it will be a daunting task whoever is chosen – the firm is locked into a costly pact with 160,000 German workers until 2012, guaranteeing the jobs despite excess capacity of about 30%. It has lost €2.6billion on its Smart micro-car venture, described as a “disaster” by Cordes. The paper added that Smart has yet to be shut down – a separate report from Reuters on Monday described its long-term future with Zetsche leading DaimlerChrysler as under threat.
The Telegraph said the biggest threat is the core Mercedes brand, now stretched thin with 180 model variations. Fast sliding down the quality league, the company had to recall 1.3 million cars in March with faulty brakes.
Mathew Brown, senior researcher at the Which consumer magazine, told the Daily Telegraph there had been an avalanche of complaints by drivers of new Mercedes models over breakdowns, and faults with electronics, brakes, and ignitions.
“We have seen a real drop in reliability at Mercedes over the past three years, far below Japanese standards,” he reportedly said.
The Daily Telegraph added that Mercedes was now ranked 27th out of 34 in the latest US quality survey by JD Power & Associates while mass market maker Ford was way ahead.
The paper noted that Schrempp himself had admitted that the new models were crammed with too much electronic gadgetry – much of it farmed out to sub-contractors – as he discovered himself when the navigation system in his S-class model sent him in circles around Stuttgart. “It kept telling me to go the wrong way,” he reportedly said.
According to the Daily Telegraph, stock markets have so far been willing to buy into the DaimlerChrysler recovery story, boosting the stock 31% over the last three months.
But the paper noted that Citigroup downgraded the stock from ‘hold’ to ‘sell’ last week, warning that the whole European auto sector looks stretched after a strong rally.
Moody’s credit rating agency on Monday cut its outlook for DaimlerChrysler from stable to negative, citing trouble at Mercedes and tough competition in America, the Telegraph added.
Stephen Pope, the head of equity research for Cantor Fitzgerald, told the Daily Telegraph on Monday yesterday that it was far from clear whether the company could win back its lost prestige, even if the stock had a strong technical profile after breaking resistance levels.
“The Mercedes Benz icon has been devalued. Their claim that the car was engineered like no other in the world has come to haunt them,” he told the paper.
