Focus on profits at DaimlerChrysler

A sense of getting down to serious business pervades DaimlerChrysler as Dieter Zetsche takes over as CEO of the world's fifth…

A sense of getting down to serious business pervades DaimlerChrysler as Dieter Zetsche takes over as CEO of the world's fifth-biggest carmaker this month.

Zetsche brings a US-style focus on profits and efficiency that the German executive honed during a tough but successful turnaround of the Chrysler group.

With Juergen Schrempp gone, along with his grand vision of building a global carmaking empire, the question is whether Zetsche can generate the same success at the rest of the sprawling group.

Even before formally moving into the driver's seat, Zetsche staked out a hard line by presenting plans for cutting thousands more jobs, primarily at the premium Mercedes Car Group division in high-cost Germany, people close to the company say.

READ MORE

Workers' backs are up over his insistence that the cuts come via attrition and that he will not add to the €950m already earmarked to fund early retirement packages for up to 8,500 Mercedes-Benz German staff.

When the group was reviving Chrysler, it left Mercedes-Benz to its own devices as long as the profits kept rolling in, Global Insight car sector analyst Christoph Stuermer said. "What Mercedes had to do was to keep pushing for bigger volume and more high-tech without getting adequate finance, so they skimmed development processes and production costs until they wore thin, which had an obvious impact on technology maturity and production stability," he said. "Now they get the money for a new round of investments and, alas, a number of people are made redundant as the new machinery gets rolled in."

Zetsche, who sports a walrus moustache, needs to decide what to do with the loss-making Smart minicar business that has been a drag on Mercedes profits. Some analysts think he should spin it off or find a joint venture partner.

Other ideas include seeking a separate listing for DaimlerChrysler's market-leading trucks and buses business or selling off Daimler's 30 per cent stake in Airbus parent EADS.

Yet Zetsche should take comfort from the way the markets greeted his arrival. DaimlerChrysler had been the European car sector's laggard until July's news that the previous chief executive, Jurgen Schrempp, would leave. Now it has narrowly outperformed the DJ Stoxx European car sector index this year.