BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Thursday, 30 November, 2000, 12:19 GMT
DaimlerChrysler's woes grow
Schrempp, DaimlerChrysler chairman
Disgruntled investors want Schrempp to go
Investor confidence in DaimlerChrysler continues to fall as the car firm's troubles grow

It faces a growing number of court cases in both Germany and the US, arising from the merger between Daimler Benz and Chrysler in 1998.

And disgruntled shareholders are unlikely to be cheered by poor US sales figures expected for November.

It may be better to have a miserable end rather than endless misery

Klaus Dieding
Association for Securities Investment
German investors are suing the car maker for 255.6m euros ($221.9m), claiming Chrysler was overvalued when the two car companies merged two years ago.

There were also calls for the resignation of chairman Jürgen Schrempp from Germany's Association for the Protection of Small Shareholders and from economics professor Ekkehard Wenger, a leading and highly outspoken German shareholder activist.

Other shareholders were more patient, but "if Chrysler doesn't look good by [the end of the next quarter], it may be better to have a miserable end rather than endless misery," said Klaus Dieding of Germany's Association for Securities Investment.

DaimlerChrysler shares fell a further 1.75% on Thursday morning to 44.7 euros, its lowest level in four years and half its April 1999 value.

American litigation

Mr Dieding's warning echoed the billionaire US investor Kirk Kerkorian's calls for the unravelling of the $36bn alliance.

DaimlerChrysler's problems surfaced this week when its third largest shareholder, Mr Kerkorian's Tracinda Corporation, announced it was suing the car maker for $9bn.

Smart car
Not profitable until 2004
Since then, other investors have jumped on the bandwagon, and DaimlerChrysler now faces three law suits in the US.

US investors have sued following Mr Schrempp's admission that the Chrysler deal was not viewed as a merger between equals - as it was presented at the time - but instead as a takeover.

The basis for the court cases is the allegation that shareholders were deceived.

Angry German dealers

In Germany, DaimlerChrysler is also clashing with 240 independent Jeep and Chrysler dealers, following an announcement that all their contracts will be terminated by the end of 2002.

The announcement followed a recent court ruling that banned the company from selling the US cars through its own Mercedes dealerships as long as it was bound by Chrysler's old contracts with the independent dealers.

Adding to the misery, the company revealed that it will take another four years before its Smart city car will bring in any profits - a full year later than previously predicted.

Car industry analysts note that very few car companies make appreciable money on small cars.

President of its Micro Compact Car subsidiary, Andreas Renschler, declined to specify how large the losses incurred to date by the Smart car.

Analysts believed the project lost about 500m euros in 1999 and that losses for this year would be in the range of 100-200m euros.

There is little relief from the US, where the car industry is expected to report on Friday that sales fell by between 4% and 7% in November. Analysts expect Chrysler to report a 5% fall in sales during the month.

Search BBC News Online

Advanced search options
Launch console
See also:

27 Nov 00 | Business
DaimlerChrysler sued for $9bn
28 Nov 00 | Business
Gambler takes on DaimlerChrysler
03 Jun 00 | Business
Automotive Empires
04 Aug 00 | Business
DaimlerChrysler sells train division
26 Jul 00 | Business
Chrysler drags down Daimler
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories