Daimler tightens grip on Chryler

Sources told Reuters that DaimlerChrysler8217;s supervisory board will meet on Friday, the second anniversary of the merger, and would likely replace Chrysler group Chief James Holden with Dieter Zetsche, currently head of the commercial vehicle unit.

Holden8217;s likely departure would come just a year after the German-dominated board forced out his American predecessor, Thomas Stallkamp, shattering any lingering illusions that the 1998 formation of DaimlerChrysler was a partnership rather than a takeover.

The expected move has demoralised Chrysler8217;s US employees and car dealers, already shaken by a steady stream of departing top American executives. When Chrysler merged with Daimler-Benz on Nov 17, 1998 to create the world8217;s number five automaker, the companies took pains to show they regarded each other as equals. They established dual US and German headquarters, Chrysler chairman Robert Eaton shared the top post at the new company with Daimler chairman Juergen Schrempp.

But cultural clashes soon erupted in the drive to integrate Chrysler with Daimler-Benz, prompting the defection of a number of high-ranking US executives.

Schrempp took firm control of the company in September 1999 by cutting the number of Americans on the management board and forcing the retirement of Stallkamp, who had opposed his efforts to take over Japan8217;s ailing Nissan Motor Co and criticized the Germany8217;s Smart mini car.

Schrempp picked the less confrontational Holden to lead the US operations. To try to boost morale and regain Chrysler8217;s nimble attributes, Holden promised the North American operations would operate with more autonomy from Germany.

As the DaimlerChrysler8217;s stock price continued to decline, the US operations slashed costs, including several new vehicle programs planned for the US market. Two weeks ago, the US operations reported a third quarter loss of 512 million for the US operations,

CHRYSLER A PAWN: In late October, Schrempp said in an interview with the Financial Times that he always intended Chrysler to become a North American unit of Daimler-Benz. quot;Me being a chess player, I don8217;t normally talk about the second or third move,quot; Schrempp said. quot;If I had gone and said Chrysler would be a division, everybody on their side would have said: quot;There is no way we8217;ll do a deal.8217; But it8217;s precisely what I wanted to do.quot;

However, Wall Street analysts questioned whether Schrempp knows what move Chrysler will take next. quot;I don8217;t think there is a grand strategy here,quot; said Saul Rubin, an analyst with UBS Warburg. quot;It8217;s management on the fly, but it8217;s almost mismanagement on the fly. This thing, to me, is being month to month or perhaps even week to week.quot;

John Schenden, a former Chrysler executive who now sits on the car dealer advisory board, said Zetsche could bring a team of German managers to the Chrysler group, raising doubts about the future of a number of second-tier American executives.

quot;It8217;s clearly disappointing,quot; said Schenden, the owner of the Pro Chrysler Plymouth Jeep dealership in Denver. quot;If Jim8217;s gone, does that mean they8217;re going to bring in new people? If the existing people were ok, why weren8217;t they ok under Jim?quot;

Chrysler8217;s skilled management, known for their cost-cutting prowess and ability to spot profitable market niches, may be lost with the German takeover, aid Seth Glickenhaus, a partner of money manager Glickenhaus amp; Co. quot;They had foresight into which models would take into the future,quot; Glickenhaus said. quot;They knew how to produce them and take many costs out of the operations. They8217;ve lost those assets.quot;