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Exec Ouster May Not Improve Chrysler

Updated:
DETROIT (AP) — The ouster of the head of the Chrysler side of DaimlerChrysler AG will cement control of the unit in German hands, but would do little to fix some of the larger problems facing the U.S. half, analysts said.

Those problems include an uneven handling of Chrysler by German officials, a high-pressure market in the United States and some strategic stumbles that have yet to be fixed.

``I don't think a change at Chrysler will have a major impact,'' said Rod Lache, an analyst with Deutsche Bank Alex. Brown. ``People basically view Chrysler as a company with a lot of problems.''

The potential Chrysler management shuffle was reported Tuesday by The Detroit News, which said president and chief executive James P. Holden would be replaced later this week by Dieter Zetsche from DaimlerChrysler AG's commercial vehicles unit.

The Stuttgart-based automaker has scheduled a supervisory board meeting for Friday. DaimlerChrysler spokesman Tony Cervone declined to comment on the reports.

Holden, an affable 49-year-old executive who rose quickly through the ranks at the old Chrysler Corp., has been ratcheting up pressure on his employees in the past several weeks to cut costs after a $512 million third-quarter loss.

Holden had previously said that he had a large measure of control over Chrysler's operations, and in recent weeks, DaimlerChrysler chairman Juergen Schrempp has expressed confidence in Holden.

But the turning point for Holden appeared to come after DaimlerChrysler had to shut seven plants for a week to reduce U.S. inventories. It's not uncommon for automakers to trim production by idling factories, although neither General Motors Corp. nor Ford Motor Co. has had to idle as many plants as Chrysler.

The move prompted Schrempp to assail Holden at an Oct. 30 board meeting for failing to tell him in advance about the plant shutdowns, the German magazine Der Spiegel reported this week.

``Shutting down a factory for a week may be normal for Chrysler's American management, but it's definitely not normal for the Daimler people,'' said Christian Breitsprecher, lead auto analyst with Deutsche Bank in Frankfurt.

Since the combination of Daimler-Benz AG and Chrysler Corp. in 1998, the two sides have struggled over control and culture, a battle that has caused investors to drive the company's stock to new lows.

While Schrempp and former Chrysler chairman Robert Eaton billed the deal as a merger of equals, the Daimler side was in charge from the beginning, controlling more seats on the company's supervisory board. Both talked about preserving a unique Chrysler culture — a can-do, scrappy attitude that Chrysler credited for its financial success over the previous few years.

But after the merger, some of the main supporters of that attitude left, including chief executive Bob Lutz and president Thomas Stallkamp, whom Eaton once said eventually could replace Schrempp.

UBS Warburg analyst Saul Rubin said Schrempp might have been unclear about how much control he was going to exert with the new company, but ``at end of the day, he was buying key executives. He wanted to keep those people, and when so many leave, that changes the face of company.''

This year brought the first downturn in Chrysler's business since the merger. Chrysler's sales have been erratic, with models posting big losses, followed by rebounds a month or two later, as the company adjusted incentives. Chrysler tried to cut incentives earlier this year, but saw sales plummet. To keep sales up, it boosted cut-rate loans and cash rebates, and kept production up, even on models due for replacement.

In addition, the markets where Chrysler made most of its money — minivans and sport utility vehicles — are far more competitive than they were just a few years ago. The new Chrysler minivans are facing stiff competition from Honda, Ford and GM, while most automakers are rushing to build SUVs for the American market.

Shares of DaimlerChrysler initially rose on the reports, then settled at $46.40, up 1 cent, in trading on the New York Stock Exchange.

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On the Net: http://www.daimlerchrysler.com
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