Daimler shareholders blast CEO

BERLIN - Disgruntled investors blasted DaimlerChrysler Chief Executive Juergen Schrempp and top managers on Wednesday for what they called poor performance and shoddy leadership at the world's fifth-biggest carmaker.

At a marathon annual meeting, shareholders lined up to complain about a series of problems capped last week by the automaker's biggest-ever car recall and news of hefty charges to restructure its loss-making Smart minicar brand.

"Shareholders' patience is exhausted," said Klaus Kaldemorgen from German fund manager DWS, scoffing at Schrempp's self-proclaimed ability to master difficult situations.

"Do you have to shoot yourself in the foot first to provide first aid?" he asked, complaining that the company had thoughtlessly put its flagship Mercedes brand at risk by letting quality lag badly.

"Playing down results seems to have become part of the corporate culture," he said to applause.

"The problems at Mercedes and Smart suggest serious management mistakes," said Thomas Maier at Union Investment, Germany's third-biggest asset manager and administrator of DaimlerChrysler shares worth 500 million euros ($922 million).

He also pointed out that DaimlerChrysler shares had lagged the performance of German blue chips and carmaking rivals over the past five years, something for which top management had to take responsibility.

Maier ripped into management for destroying value with an ill-fated investment in Japan's troubled Mitsubishi Motors Corp , letting quality issues cast a long shadow over Mercedes, and repeatedly failing to hit earnings targets.

Union will abstain from the vote to approve the performance of management in 2004, Maier said.

Despite the grumbling, the management board and the supervisory board won nearly 95 per cent approval in votes on whether to support their performance in 2004.

In his opening address, Schrempp insisted DaimlerChrysler had made clear progress in 2004 despite difficult conditions, had hit its 2004 operating profit target, and proposed a dividend among the most generous of German blue chip companies.

"Of course we are not satisfied with the way the stock price has developed," he said, but stressed he was committed to restoring solid profitability while rescuing Mercedes' image.

"This of course will cost money but this is money well spent," he said, calling Mercedes-Benz the world's most valuable car brand.

He said unit sales should rise slightly this year as new models like the Mercedes M-class offroader, B-class sports wagon and S-class full-size car come onto the market.

Sales of Mercedes-Benz brand cars fell 2.5 per cent in March, while deliveries of Smart compacts gained 49.7 per cent.

Chief Financial Officer Bodo Uebber told the meeting that spending to fix quality problems at Mercedes-Benz would weigh on results again this year, but gave no details.

Its shares gained 0.3 per cent to close at 34.59 euros, in line with a 0.4 per cent rise in the index.

DaimlerChrysler stock has almost halved in value and lagged the DJ Stoxx European car sector index by more than one-third since Daimler-Benz's 1998 union with Chrysler, which Schrempp trumpeted as creating the first truly global carmaker.

Since then, it has lurched from one problem to the next. Its Asian strategy blew up when managers revolted last year and forced Schrempp to stop fresh funding for Mitsubishi.

Even as US-based Chrysler and the group's trucks business emerged from earnings slumps, its Mercedes brand stumbled into a quagmire of quality problems that prompted it last week to recall 1.3 million cars.

A day later, management announced it would take up to 1.2 billion euros in charges to restructure Smart, which has not made a profit since the brand's debut in 1998 and is not set to break even until 2007.

Still, Schrempp remains firmly in the saddle thanks to support from Chairman Hilmar Kopper and major investor Deutsche Bank, which has a 10.4-per cent stake.
Schrempp is a shrewd insider who has cultivated support from labour representatives on the board and whose contract was extended last year to 2008 despite the Mitsubishi flap.

Former Mercedes chief Juergen Hubbert, making his last appearance at an annual meeting, won a round of applause after Kopper thanked him for his "outstanding commitment to the Mercedes brand".

- REUTERS