Germans take charge

The Detroit News Bob Eaton, left, and Bob Lutz posing with the Plymouth Prowler at the 1996 North American International Auto Show in Detroit. Chrysler's public relations staff fed the image of Eaton and Lutz as a harmonious team at the top, but the two executives kept a chilly distance in private.

Schrempp takes over as DCX driver

Eaton’s bombshell about his retirement deflates Americans

After meeting with Kopper and Schrempp, Eaton flew to London, where he began making a series of telephone calls to Vice-President Al Gore, Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and Michigan Governor John Engler. He tried to reach Detroit Mayor Dennis Archer but missed him.

    In Auburn Hills employees stood transfixed at television sets throughout the massive Chrysler Tech Center. The scene was repeated at Chrysler factories, union halls, and car dealerships. Executives were briefed on how to respond to questions. “We’re calling it a merger of equals,” Stallkamp said.

    Schrempp made the telephone call he had been dreading for weeks. He reached Ford Chairman Alex Trotman in his office in Dearborn. [Schrempp and Trotman had been engaged in a cautious, secretive dance throughout Daimler’s talks with Chrysler. Trotman had approached Schrempp with idea of a Ford-Daimler merger. Teams from both sides had quietly met in London to discuss the prospects, even as Daimler operatives hammered out a deal with Eaton’s hand-picked team of negotiators. But, in the end, the Ford family’s refusal to dilute their control put the brakes on further discussions. In April, Trotman even suggested to Schrempp that Chrysler might make an ideal partner for Daimler.]

The call Schrempp dreaded placing

“Alex, I wanted you to hear it from me personally,” Schrempp said. “Bob Eaton and I are going to announce our merger tomorrow.”

    Trotman didn’t say a word. He just listened in total silence. Schrempp could almost feel the anger through the phone.

    At 10 p.m., London time, about 50 people jammed a small conference room in the Dorchester Hotel. Eaton walked in from one side of the room, Schrempp from the other. They met at a table in the center and clasped hands. “We have done it, Bob,” Schrempp said, beaming. Together they sat down and signed 20 copies of the formal agreement to merge Chrysler Corporation and Daimler-Benz AG. Corks popped on bottles of French champagne. Eaton and Schrempp raised their glasses in a toast to DaimlerChrysler.

    The deal didn’t just shock the automotive world. It underscored the new era of global megadeals, where nationalism took a backseat to the shared ambitions of corporate giants eager to seize advantage of open markets, standardized technology, and emerging opportunities.

    Transnational mergers had already occurred in a wide array of industries, from drugs to telecommunications to publishing. But the union of two auto companies — the quintessentially American maker of Jeeps and minivans with the German standard-bearer of luxury sedans — took globalization to heady new heights. Size alone wasn’t the measure of muscle anymore. Rationalization on an epic scale had, overnight, become the new standard in the mass production of four-wheeled transportation.

    Eaton made the decision to cast off Chrysler’s independence, to offer up one of America’s corporate icons to a German suitor, for the eye-popping price of $36 billion. When Eaton took the reins of Chrysler five years earlier, he had vowed to be its first chairman “never to lead a Chrysler comeback.” The merger ensured he would never have to. With a stroke of a pen, Eaton agreed to sell Chrysler to the biggest company in Germany.

    In the white heat of the negotiations, he made major concessions to get the deal done: the name, the domicile, and even his own tenure going forward as chief executive officer. Eaton sold Chrysler simply because he believed a merger would save it. But in the final hours before he signed the company away, Eaton made one decision he would regret forever.

    He made up his mind to tell the world of his commitment to step down as co-CEO of DaimlerChrysler within three years. That was his arrangement with Schrempp, so why not be honest about it?

Eaton urged not to become a lame duck

But the ramifications of announcing it publicly were profound. By announcing his planned departure, Eaton exacerbated the fears of Chrysler’s employees. He immediately became a lame duck; his power and influence diminished severely before the ink was dry on the biggest industrial merger in history. Stallkamp, for one, pleaded with him not to do it. “People will perceive this as the loss of their leader, and that’s going to be a huge problem,” Stallkamp said. “Don’t say it publicly to the troops. You don’t have to do that.” Eaton wouldn’t budge. “I’m going to be up front about it,” he said. “I am what I am. What you see is what you get.”

    Schrempp and Eaton arrived at their press conference to a fusillade of popping flashbulbs and the type of media frenzy usually reserved for rock stars and Hollywood luminaries. Schrempp, in a dark suit and bright red tie, strode to the microphone and proclaimed that DaimlerChrysler would do nothing less than “change the face of the industry.” The world was about to witness what the European business community already knew. Schrempp was a lightning bolt of change, the single most dynamic business leader on the continent and now an international force.

    Schrempp beamed when reporters asked about his relationship with his new partner, Eaton. “I have somehow the feeling he is a good guy,” Schrempp cracked, “because he is smoking the same cigars.” When the next volley of questions zeroed in on how DaimlerChrysler would be run, Eaton bared his secret.

    “I have agreed to step down at the end of three years,” Eaton said. “And unless we are not as successful as we plan to be, I have no doubt that Juergen Schrempp will be the sole CEO. Until then, we will both be involved in the full business.”

    Every major decision, Schrempp promised, would be made in tandem.

    “If there is ever a time when the two of us cannot resolve an issue,” he said, “then we should resign.”

    The reaction to Eaton’s disclosure in Auburn Hills ranged from shock to disbelief. “What exactly did Eaton say?” one Chrysler manager asked a reporter. “He’s leaving? We’re merging and he’s leaving?” Lutz, an astute student of leadership and power, realized immediately that Eaton had made a serious mistake. “He just lame-ducked himself,“ Lutz told a confidant. “There’s no turning back from that.” Even Eaton’s strongest supporters on his board were aghast at his revelation. Bob Lanigan, perhaps Chrysler’s most influential outside board member, called him in London later in the day. “What did you do that for?” Lanigan snapped. “Jesus Christ, that’s ridiculous. It just creates an undue degree of complicity in the minds of Chrysler people.”