For Schrempp, It Was A Cruel April
By Alex Taylor III

(FORTUNE Magazine) – Has Jurgen Schrempp been fatally weakened by a management revolt, the collapse of his partnership with Mitsubishi, and the crumbling of his dreams for a global automotive alliance? Or can the combative DaimlerChrysler chairman shore up his empire? One fast-rising executive on the Daimler board--a protege of Schrempp's--has already fallen victim. Are more to follow?

Those were some of the questions asked after an extraordinary turn of events in late April that stunned company insiders and outsiders alike. First Daimler announced it was cutting off financial support for its struggling partner, Mitsubishi, because it didn't see any possible return on up to $7.5 billion in additional capital that Mitsubishi needed to develop new models. The Japanese automaker was a vital part of Schrempp's strategy to pry open the fast-growing Chinese market. Then another partner, South Korea's Hyundai, signaled that it, too, wanted to loosen its ties with Daimler. Joint ventures between the two companies to build a small car and a truck have foundered, and Hyundai was said to have been enraged by Schrempp's decision to strike his own deal to build Mercedes cars in China.

With that, tales of corporate intrigue took center stage. Reports emerged that Schrempp pulled the plug on Mitsubishi only after strenuous opposition from members of his own management board. There was even talk that Schrempp, 59, had offered to resign in atonement for his failed strategy, even though he recently negotiated an extension of his contract until 2008. Also offering his resignation, according to these reports, was Eckhard Cordes, 51. A key aide who helped to develop the global scheme, Cordes currently runs the fast-improving commercial-vehicle division and is considered a leading candidate to succeed Schrempp.

Cordes kept his job, but another Schrempp protege, Wolfgang Bernhard, 43, saw his promotion to head the Mercedes car division yanked away. By one account, Bernhard was bounced for opposing the Mitsubishi bailout too strenuously; by another, for disrespecting Mercedes' elders with his abrasive manner. All the buzz about Schrempp's status caused Daimler's supervisory board, equivalent to a board of directors, to take the unusual step of issuing a statement reaffirming its support for Schrempp and his strategy.

The behind-the-scenes scuffling obscured Daimler's stronger operating profits in the first quarter, led by improved sales of Chrysler cars and trucks and commercial vehicles. Still, Schrempp is left in a precarious position. He now faces the task of rebuilding relationships with his own executives while devising a new strategy to keep DaimlerChrysler from falling further behind competitors. Schrempp isn't the first auto executive whose dreams of global glory have evaporated. But right now he's the most prominent--and the most endangered. --Alex Taylor III