The DaimlerChrysler/Mitsubishi Motors partnership
is officially over. In a surprise announcement made late April, parent
company DC called the MMC rescue mission a dead-end investment.
Having poured nearly €2.5bn ($3bn) into the ailing Japanese carmaker,
even architect, DC chief Jürgen Schrempp, could no longer justify
any further investment and refused to fund the reported further €2bn
($2.3bn) necessary to complete its plan.
By acquiring a 37 per cent in MMC, Schrempp had sought to add an Asian
dimension to his strategy. However, it would seem DC’s only remaining
option now is to wave goodbye to its controlling stake.
At the carmaker’s annual shareholders’ meeting in Berlin,
Germany, earlier last month, company officials – including Schrempp
– were reluctant to talk about plans for the Japanese carmaker.
Shareholders had voiced objections to more spending on MMC, though some
sources speculated that the company was trying to get other investors
– possibly the Japanese government – to help bail out the
struggling carmaker.
Following the announcement, all eyes were on Schrempp and there was even
speculation over his future at DC, though despite his failed Asian strategy,
by the end of the week he received full backing from top managers at the
company.
An official statement from DC read: “The supervisory board underscores
its complete support for the chairman of the board, Professor Juergen
E. Schrempp, and his colleagues in the board of management.”
Instead, in an even more surprising manoeuvre by DC chiefs, Chrysler's
abrasive manager, Wolfgang Bernhard, who had just been named head of Mercedes
Car group – and due to replace Jürgen Hubbert only this month
– was told he would not assume his new responsibility at Mercedes
afterall.
The move will no doubt embarrass Bernhard, who has won much praise for
his role in Chrysler. The German will – for now – retain his
original COO status at Chrysler.
Things went from bad to worse following DC’s announcement after
MMC president, Rolf Eckrodt, resigned stating that the decision made by
DC to neither participate in a capital increase nor grant further financial
support to his company was the main factor in his decision to walk.
Yet AE has learnt that Eckrodt's tenure was already under threat prior
the DC announcement, with MMC suffering poor sales and heavy losses in
the US.
Until a new candidate for the task is found, Keiichiro Hashimoto, board
member and chief financial officer of MMC, will oversee ongoing business.
MMC has reportedly some staggering debts in the region of €8.4bn
($10bn) with a market capitalisation of only €2.8bn ($3.3bn). Additionally,
in the year to the end of March 2004, the carmaker expects to record a
€553mn ($660mn) net loss.
Former shareholder, Mitsubishi Group – led by Mitsubishi Heavy Industries,
Mitsubishi Corporation and the Bank of Tokyo – has raised the €1.2bn
($1.4bn) to save the company for now, though the money will not be enough
in the long term.
The struggling Japanese carmaker will need to find over €1.5bn ($2bn)
just to stay alive. Investors are obviously cautious, with many claiming
that injecting so much money into a broke carmaker may be like throwing
money down the drain.
DC will clearly have to rethink its Asia strategy. Currently, fifth largest
carmaker in the world is relying on its 10 per cent share in Hyundai,
acquired in 2000. Yet even that alliance may soon be coming to an end
(see page six).
DC Finance director, Manfred Gentz, admitted at a recent press conference
following the announcement, that the company is designing a new strategy
for Asia, though no further details were announced.
Graeme Maxton, partner at Autopolis consultancy, told AE that on the one
hand it was correct for DC to pull the plug on MMC when it did, though
he admits the move is a real disaster and has put the car making giant
back to square one in terms of its Asian programme.
Maxton says: “DC's strategy in Asia is almost back where it started,
which is good healthy sales for Mercedes-Benz cars in the wealthier Asian
markets.”
DC chiefs insisted that it will continue its strategy of having a presence
in every major market and segment, but analysts across the world now agree
that Schrempp's vision of a global carmaker forged from three different
companies needs to be re-thought.
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