Tuesday, September 13, 2005

Frank Augstein / Associated Press Incoming DaimlerChrysler CEO and new Mercedes chief Dieter Zetsche, who took the helm Sept. 1, stands next to the new S-Class at the Frankfurt Auto Show in Frankfurt. The new version of the luxury carmaker's flagship was unveiled Monday.

Frankfurt Auto Show

Zetsche's edict: No infighting

Mercedes' new boss focuses on earnings, teamwork

By Christine Tierney / The Detroit News

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FRANKFURT -- Dieter Zetsche, Mercedes-Benz' new boss and incoming CEO of DaimlerChrysler AG, has delivered a strong message to employees that boosting the luxury carmaker's profits and sagging quality ratings will require a team effort. And he won't tolerate corporate infighting.

Zetsche, making his first major public appearance as the head of Mercedes, told reporters at the Frankfurt Auto Show that he wanted to boost Mercedes' earnings to a robust 7 percent of sales, a target set by his predecessor, Eckhard Cordes. But in a departure from Cordes' goals, Zetsche said he wanted to restore Mercedes' quality ratings to the highest levels.

"It is our objective to become No. 1 in J.D. Power," Zetsche said, adding that the carmaker should treat consumer feedback with utmost seriousness. "It's not up for us to decide" what consumers want, he said. "We will definitely be within the top ranks in the next three years."

Cordes, who announced that he would leave Mercedes after being passed over for the top job, had said that a No. 1 ranking was not the ultimate goal because the criteria included in the J.D. Power and Associates study reflect certain U.S. preferences that might not be relevant for the automaker's international customer base.

Zetsche, who was appointed CEO of DaimlerChrysler in July after restoring the Chrysler Group to profit, took over the management of Mercedes on Sept. 1. In a memo sent out to all Mercedes employees four days later, on Sept. 5, Zetsche said he wanted to deal with them in an open and frank manner and, in turn, wanted employees at the automaker riven with feuds and rivalries to function as a team.

"It's obviously natural to talk with your team, and people should hear something from the first day," Zetsche told The Detroit News. He said Mercedes was filled with talented people. But, he added, he wanted to make clear that "everyone who is second-guessing or political is not part of the team."

Several Mercedes employees said they were impressed with the open and forthright tone of the memo after more than a year of turmoil. In the past 12 months, the automaker has had three CEOs. Early last year, DaimlerChrysler appointed Wolfgang Bernhard, Zetsche's former No. 2 at Chrysler, to head Mercedes but then yanked the offer after a bruising battle on the management board.

For many years, high-level Mercedes executives have run their department like fiefdoms, and, at times, pursued their own interests to the detriment of the company.

The situation deteriorated when Mercedes reported a $1.2 billion loss in the first quarter -- and only $15 million in profits during the second. The automaker has been struggling to improve vehicle reliability and announced its largest ever recall -- 1.3 million vehicles -- in April.

In 2002, Zetsche took over the management of a similarly demoralized group at Chrysler but gradually won over the staff with his plain manner, alternately friendly and blunt, and his focus on results.

In the memo to Mercedes employees, Zetsche said the Stuttgart-based automaker faces serious challenges but also great prospects as the world's most renowned automotive brand.

Employees also were struck on Monday at the unveiling of the new version of Mercedes' flagship, the S-Class, by the presence of several members of the old guard, including former Mercedes boss Juergen Hubbert. Acknowledging their efforts to fix the problems that have tarnished Mercedes' reputation in recent years, Zetsche said several times that he was grateful to his predecessors for all their efforts.

"Internally, we're measuring better results than ever before," he said. "Some of the improvements we're seeing today were generated three years back."

Mercedes' ratings in J.D. Power and Associates' reliability survey are still well below average but its initial quality ranking has improved.

"He's an honest guy," said Hubbert. "I didn't have a chance to fix the problems," he said, because he had reached retirement age. But he said people at Mercedes "have worked very hard in the last few years to solve problems." Now, he said about the new team, "they can take it to become a great success story."

Although Zetsche was acting in his role as Mercedes boss, it was apparent that his influence already extended across the DaimlerChrysler group. Schrempp, who tends to keep a low profile at auto shows, was absent Monday.

Zetsche said he was pleased to have the opportunity to focus solely on Mercedes for four months. He told reporters that when the supervisory board appointed him the next CEO, they considered the possibility that Cordes would leave. At that point, Zetsche was expected to take over Mercedes if Cordes left.

"I'm very glad for that opportunity," Zetsche said.

Zetsche did not announce new initiatives for the automaker, sticking with profit targets already in place at Mercedes and the restructuring plan under way at its troubled minicar division, Smart. But he said Mercedes would have to learn ways to keep up its aggressive product expansion plans with fewer resources to become more profitable.

At Chrysler, annual development spending has declined by around 24 percent, to $6 billion, from $8.4 billion in 2000, even as the model lineup has expanded.

Zetsche, who previously held top sales and engineering positions at Mercedes, declined to say how long he expects to run the luxury carmaker. He is scheduled to succeed Schrempp as CEO of DaimlerChrysler at the beginning of 2006.

You can reach Christine Tierney at (313) 222-1463 or ctierney@detnews.com.