DaimlerChrysler Boss Promises a Good Year

Jürgen Schrempp, the chief executive of DaimlerChrysler, has given himself one year to get the troubled company under control. In an interview published in the company's in-house magazine on Thursday, Schrempp promised to turn things around in 2005.

"I'm not promising too much when I tell you that we will get a grip on the challenges within a year," Schrempp said. "We will do everything that is necessary to become number one again, we have to act and we must improve."

In the past year, problems have plagued DaimlerChrysler, which includes the Mercedes-Benz, Smart and Maybach brands. Particularly at Mercedes, the poor reliability of some models helped contribute to an overall third quarter drop in profits 62 percent, down to €304 million ($403 million), at the Mercedes Car Group (MCG).

Schrempp also conceded in the interview that overall operating profits for the entire year might fall below expectations.

Many reasons for decline given

"We have analyzed the causes and problems, and we have prepared corrective measures and solutions," said Schrempp. "We will work under a great pressure to implement them."

Among the reasons for the profit decline, Schrempp sited decreased consumer confidence resulting from reliability problems, the introduction of new models, the rising cost of oil, the strong euro and the continuing poor performance of the Smart brand.

But DaimlerChrysler was on the case, he stressed, pointing to a recent "quality offensive" to address the reliability problems. He promised Daimler would invest heavily to improve the quality of new models at Mercedes, which have fallen from being one of the most reliable car brands in surveys to one of the worst, and re-educate dealerships to raise service standards.

Complex issues plague luxury giant

Like many German car makers, Mercedes has struggled in recent times. The company stands at a crossroads, as increased competition from Japanese competitors and the rising cost of "Made in Germany" produced luxury vehicles has forced management to carefully consider the future.

In July, labor unrest and strikes were prompted by the management's threat to move production of the new C-Class sedan to South Africa if personal costs at the Sindelfingen factory were not cut by €500 million.

Though not directly mentioned in Schrempp's interview, ways to keep the high cost of producing cars in Germany below the revenue threshold will likely be another issue in 2005.