Key exec leaves Daimler
Wall Street worries Stallkamp's departure will hurt performance, morale
NEW YORK (CNNfn) - DaimlerChrysler's North American chief announced plans to resign Friday as part of a management shakeup that puts German executives firmly in control of the world's fifth-largest automaker.
Thomas Stallkamp, a 19-year veteran of Chrysler, is widely credited with helping to turn the company around before the automaker's merger with Germany's Daimler-Benz last year. His departure comes as the company trims its board to 14 members from 17 and reduces the U.S. representation on the German-American vehicle maker's board.
Analysts said the departure of Stallkamp is a serious loss for DaimlerChrysler because he had been hand-picked by co-Chairman Robert Eaton to head up the company's North American operations. With Eaton's scheduled departure by 2002, the two most powerful positions in the company will belong to co-chairman Juergen Schrempp and Finance Chief Manfred Gentz.
"It's a very deep concern in the near term because there's no question it will be a deterrent to U.S. investors. He was highly respected by institutional investors in the United States," said John Casesa, analyst at Merrill Lynch.
Lehman Brothers downgraded DaimlerChrysler (DCX) stock on Thursday, advising investors interested in the sector -- which has seen strong sales and profits -- to shift investment to Ford Motor Co. (F).
"We think it (DaimlerChrysler) is a dead money stock for quite a while," Lehman Brothers analyst Nick Lobaccaro told CNNfn Friday morning.
"Ford is trading at eight times earnings while DaimlerChrysler is at 12 times earnings. We think Ford has a strong and stable management team while we're seeing turmoil at DaimlerChrysler," Lobaccaro said. "And Ford is increasingly investing in products that make a lot of money, whereas Daimler is beginning to try to make vehicles that don't tend to make a lot of money."
Company denies reports of discord
Company executives tried to stem the concern of employees and investors Friday. In a conference call with reporters Eaton tried to dismiss reports of a rift, cultural clash or power shift within the company.
"There's simply nothing to that," Eaton said. "The dynamics in the board of management are absolutely fantastic. This isn't a German or an American thing."
Stallkamp, in an e-mail to U.S. employees, echoed Eaton.
"In any merger, issues may arise as a result of different styles or corporate cultures. But these issues have been worked out and will be worked out in the future because they are not the result of personalities or national differences."
Still, analysts were not convinced by the company's efforts.
"There isn't any way of putting a decent spin on it," said Warburg Dillon Read analyst Saul Rubin. "It's a loss for the company and it consolidates Schrempp's control."
Reports of Stallkamp's departure started circulating Wednesday, sending the stock down on the Frankfurt exchange Thursday, as well as hurting the trading of its American depositary receipts here.
Both shares rebounded somewhat Friday, with the stock closing at 64.75 euros, up just 0.07 euro after being down in earlier trading on the Frankfurt exchange. DaimlerChrysler ADRs closed up 2-1/8 at 68-3/8 in New York.
European analysts did not express as much concern, although even they were somewhat surprised by some of the moves.
"It did surprise me that there wasn't even an attempt after Stallkamp's departure to give the American side the second most important post -- that of the finance chief," said Pia Christiana Schulze, analyst at Bankhaus Merck, Finck & Co. Gentz remained chief financial officer on the reorganized board.
The appointment of an American CFO would have ensured a balance of power between former Chrysler and Daimler executives in the merged company, Schulze said, as well as helped "win back the trust of institutional investors in United States."
But Peter Worel, analyst at Bayerische Landesbank, said European investors were of far greater significance to the company than their counterparts on the other side of the Atlantic.
If the company has succeeded in completing its integration, as it said in its statement, this has been done with "quite amazing rapidity," Worel said.
Stallkamp will be succeeded by Canadian James Holden, a Chrysler employee for nearly 20 years. Holden also will head up the Chrysler-Plymouth-Jeep-Dodge division, one of three newly created units, along with a commercial vehicle and a division including the Mercedes-Benz brand as well as the European "smart" economy car.
Analysts say that the combined DaimlerChrysler has a lot of management strength to draw upon, but there is also the belief that Stallkamp's record was strong enough that it will hurt the company to have him leave.
"There's a deep Chrysler team that helped the company -- it wasn't just him -- but he's very, very highly regarded, certainly considered among the top auto executives in the world," Lobaccaro said. "So it is a question, why can't you have a role for perhaps one of the most talented guys in the industry?"
Casesa said he believed reports that Stallkamp wanted to take a slower approach than Schrempp on integration of the two companies and said that long term it is best for the company to have a unified view on the management team.
Without knowing details of any non-compete clauses in Stallkamp's agreement with DaimlerChrysler, Casesa expects to see him back in the auto industry as soon as he's allowed.
"He'll be very desirable to competitors," he said.
Details about Stallkamp's plans were sketchy, but the official company statement suggested he's looking at some kind of change, perhaps away from autos.
"The majority of my career has been spent implementing supply chain management and creating new business methods. I would like to continue to explore those areas at a less hectic pace," Stallkamp is quoted as saying in the release.
Americans' clout and morale to suffer?
The revamping will leave Americans with diminished clout on DaimlerChrysler's German-dominated board. Americans account for seven seats on the current 17-member board, or about 41 percent of the votes. In the revamped panel, they will hold five of 14 seats, representing 35.7 percent.
The one gain by Americans is that Tom Gale -- the board member in charge of product development for the Chrysler, Plymouth, Jeep and Dodge brands -- will stay on the board and head a company-wide automotive council whose mission is to look at "integration opportunities and ensure cross-fertilization of innovation, knowledge, technologies and ideas."
But there have been reports that Gale, one of the industry's most respected design executives, is looking at leaving sometime this winter and is upset over the loss of Chrysler's autonomy under the merger. A Chrysler spokeswoman would not comment on the report about Gale.
Still, the departure of Stallkamp is likely to worsen morale problems among top U.S. executives, Lobaccaro said.
Robert Eaton Juergen Schrempp
"There's probably going to be a little bit of an alienation," he said. "The morale is likely to sink a bit. He was really their leader. Whenever they have poor morale, it could impact performance. So we'll be cautious on the stock until they kind of hit bottom and you begin to see some light at the end of tunnel."
Fahnestock & Co. analyst Richard Hilgert said suppliers have told him DaimlerChrysler has begun moving away from its partnership program with them, an approach Stallkamp championed as he improved supplier relations and cut costs.
"We are going to see more resumes coming out of Auburn Hills," Hilgert said, referring to the Michigan city that is home to DaimlerChrysler's U.S. headquarters. "I don't think it's over yet."
Eaton conceded morale and questions about the leadership at DaimlerChrysler has been unsettling to the employees and investors, but said Friday's announcement should allow the combined company to move past those concerns.
"There's no doubt that speculation out there has been a negative on the stock. It's been a negative for morale here," he said. "As people understand where we are in the integration process ... morale here will come back very quickly."
Culture clash seen
The announcement of Stallkamp's departure by the world's No. 5 car maker came after earlier reports of a growing ideological clash between the conservative Stallkamp and his Schrempp.
Schrempp has preferred a quick, seamless integration, and judging from past precedent he is willing to take harsh measures to achieve his goals.
In 1996, in what was then a revolutionary move on Germany's placid corporate landscape, Schrempp shut down Dutch aircraft-maker Fokker, resulting in the loss of more than 5,000 jobs.
But Stallkamp also had a record of acting quickly to make cuts, Casesa said.
"Stallkamp has a record of getting things done quickly, efficiently and effectively," he said.
DaimlerChrysler described its managerial streamlining Friday as part of an effort to cut costs as it reorients its focus on core auto, aerospace and services operations.
Another casualty of the board reshuffle, Latin American sales chief Theodor Cunningham, will head up sales and marketing for Holden's division.
Board member Heiner Tropitzsch will retire by the end of the month, replaced by Guenther Fleig, the new head of human resources.
Stallkamp will remain DaimlerChrysler's vice chairman until his departure "to ensure an orderly transition," the company said Friday.
-- from staff and wire reports
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney