Profile: Jurgen Schrempp - A gamble with Germany's pride

The man who took chances to transform Daimler-Benz is doing it again with the pounds 23bn Chrysler merger, writes Andrea Rothman

IF JURGEN SCHREMPP were to quit today as chairman of Daimler-Benz, he would be remembered as the man who transformed the ill-focused German industrial company into one of Europe's most profitable car makers. But the 53-year-old, cigar-smoking executive who plays jazz trumpet is now contemplating the biggest business risk of his life: a merger with Chrysler that would create the world's fifth-largest car company on vehicles sold.

"It's quite an interesting gamble," said Colin Whitbread, an independent car industry consultant in Britain. "If he retired now, history would say he's been extremely successful, unlike his predecessor" - former Daimler chief Edzard Reuter, whose diversification had to be dismantled by Schrempp.

Also, a merger with Chrysler would mean sharing Germany's industrial jewel in the crown with an American corporation. "There's a lot of nationalistic pride involved with Mercedes-Benz," Mr Whitbread said.

Schrempp does not shrink from a gamble. While running Daimler-Benz's aerospace business, Dasa, which he built into the world's fourth-largest aerospace company, Schrempp took a DM2.3bn (pounds 780m) risk in buying 51 per cent of Dutch aircraft maker Fokker, which he felt would propel Dasa to the top spot in Europe in regional planes.

When he realised it was a mistake, Schrempp had the nerve to pull the plug, writing off the investment and cutting off Fokker in a move that contributed to Fokker's demise.

Daimler-Benz's acquisition of Chrysler in a stock swap valued at $38.6bn (pounds 23bn) looks a sensible move. It would achieve what the world's oldest car company has tried to bring about for five years: to grow from a maker of Mercedes-Benz luxury cars to a mass producer of cars and trucks.

The move would add Jeep Cherokees, Dodges and Plymouths to the Mercedes line and change Daimler-Benz's corporate profile for the fourth time since it began making motorcycles 108 years ago.

Schrempp has already done much to move the company in a new direction. To cut Mercedes's reliance on the narrow and increasingly crowded luxury car market, Schrempp has moved into small urban cars. The first attempt - the A-Class sub-compact - courted a publicity disaster when it flipped over in test runs, but has bounced back and is selling well. Soon to come is the "Smart Car," a joint venture with the Swiss maker of Swatch watches. This tiny car hits the European market in October.

Schrempp has slashed costs on his luxury cars, whose prices soared due to what he called "over-engineering". He helped create a more youthful image for Mercedes through a sporty roadster, the SLK, that sells at a relatively modest DM55,000. Waiting lists are up to two years.

His moves since becoming chairman in June 1994 have recast Daimler- Benz and rescued it from Reuter's attempt to turn it into an integrated, high-tech company. Reuter made Daimler-Benz a holding company in 1989 with four operating arms: Mercedes for cars and trucks, Dasa for aerospace, Daimler-Benz InterServices (Debis) for financial and computer services, and AEG for engineering.

But the structure did not work and Schrempp initiated a radical cure. He dismantled unprofitable units such as AEG, slashed 10 per cent of the workforce and modelled Daimler-Benz on General Electric of the US, carving the company into 25 operating units. His motto: 12 per cent return on equity for every business unit - or out.

After a record loss of DM5.7bn in 1995, Schrempp was able to boast of a profit for 1996 of DM2.8bn and for 1997 of DM3.2bn before a tax credit.

It is an achievement to boast of, though it raises questions about how a man of such drive and accomplishments might feel about sharing power with another. He was quoted by the Dutch newspaper Trouw in 1996 about Daimler: "This company needs me more than I need the company. Do you think that's arrogant? I can tell. Write it down," he ordered a journalist.

"I am the first top man who has blown DM2.3bn (by investing in 51 per cent of Fokker) and who says without a doubt, this was all my fault. While other managers have been fired for DM50m, I'm still here. And I think I'm not even arrogant - just very self-assured."

Philippe Houchois, analyst at Standard & Poor's DRI in London, said that if a Daimler-Chrysler merger went ahead it would be Schrempp, if anyone, who would end up on top. "This may be described as a merger, but if you look at the size of the companies, Daimler-Benz is obviously bigger. It looks more like an acquisition of Chrysler to me."

Mr Houchois says Robert Eaton of Chrysler is "one of the more modest chief executives - a simple, straightforward man who I think might be quite willing to be in a number two position if that's what was needed."

Schrempp's assurance and dynamism also colour his personal life. An avid mountain climber, he has scaled peaks with Reinhold Messner, famed for being the first person to climb Everest without extra oxygen. He enjoys living it up: German newspapers made much of his detention by Italian police in 1995 after he and two Daimler-Benz employees were noticed at 2am on Rome's Spanish Steps in a "merry mood with a bottle of wine," said official reports.

Born in Freiburg, in southwestern Germany, Schrempp started as a car mechanic at a local Mercedes garage. He later went to university to train as an engineer and returned to Daimler-Benz, holding many posts, including several outside Germany.

In the 1970s he worked for Mercedes in South Africa. He then went to Cleveland, Ohio, working for a truck subsidiary in the early 1980s and had another stint running Daimler-Benz in South Africa before being tapped to run newly-formed Dasa.

Schrempp took over at a time when aerospace was experiencing its worst- ever slump, but he transformed Dasa from a motley collection of companies into a world power in civil aviation, building airplanes through its 38 per cent stake in Airbus as well as satellites, missiles and aero-engines. Schrempp proved himself a bold risk-taker who was not afraid to offend: he stunned some in Europe's aerospace industry by initiating talks with Airbus rival Boeing about working together on a super-jumbo plane. Talks later fell apart.

He also battled for Dasa's right to do final assembly for two of Airbus's newest aircraft, the A321 and A319, in Hamburg: the first time an Airbus was assembled outside France, and a decisive victory over the French, who jealousy guarded their right to assemble the aircraft.

Chrysler, however, is another kind of deal entirely. While it makes good business sense, successfully linking the pride of German industry with an American brand will require more than the instincts of a gambler to bring about.