Schrempp completes testimony in Daimler case
WILMINGTON, Del. (AP) – DaimlerChrysler AG chairman Juergen Schrempp insisted again that the deal creating his company was a merger of equals, as he finished testifying Thursday in a federal lawsuit challenging the combination. “We agreed with it, we wrote it down in a contract, and we did it,” Schrempp said in his concluding remarks in federal court.
Billionaire investor Kirk Kerkorian is suing DaimlerChrysler, claiming that Daimler-Benz falsely characterized a takeover of Chrysler as a merger.
“I’m very pleased that it was possible for me to present the facts to the judge,” Schrempp told reporters following more than two days of testimony. “It’s obviously in the hands of the judge to decide. I will go back to work now.”
“I still believe the merger of equals was fantastic,” he said. “We are making tremendous progress. I have no regrets, and we are now DaimlerChrysler.”
Kerkorian’s Tracinda Corp. was the largest Chrysler shareholder at the time of the merger. He is suing for more than $1 billion in compensatory damages, claiming that Daimler-Benz avoided paying him an acquisition fee of up to 62 percent on his shares when the companies merged.
DaimlerChrysler maintains that Kerkorian supported the deal and grew disgruntled only when his shares lost value.
Finishing his cross-examination, Kerkorian attorney Terry Christensen asked Schrempp about the resignation from the DaimlerChrysler board of Dennis Pawley, who was head of manufacturing for Chrysler.
Pawley was the first of several Chrysler representatives to leave the board, which at the time of the merger had voting membership split evenly between Daimler-Benz and Chrysler, each having eight representatives. As of Jan. 1, 2004, the board will consist of 10 Daimler representatives and one Chrysler representative.
Schrempp testified earlier this week that he had first learned of Pawley’s impending resignation in August 1998.
But Christensen produced a chart from a presentation Schrempp made to the Daimler-Benz supervisory board in May 1998 indicating that Pawley would resign at the end of the year, and that his position on the board would be made “redundant.”
Schrempp said he couldn’t recall exactly when he first learned of Pawley’s resignation, but that he tried to persuade him not to leave.
Christensen also produced a document indicating that the Daimler-Benz supervisory board was told “the final result would be a German AG with a wholly owned subsidiary in the USA,” and that Schrempp assured the board that German shareholder and employee interests remained safeguarded in the deal.
“I can imagine there was a conversation by (former Chrysler chairman) Bob Eaton on the other side that Chrysler shareholder interests were safeguarded,” Schrempp replied.
Schrempp also defended the replacement of former Chrysler president James Holden, whom he fired, with German executive Dieter Zetsche.
A key element in Kerkorian’s lawsuit is a 2000 interview Schrempp gave to the Financial Times, in which Schrempp said the deal was billed as a merger of equals “for psychological reasons” and described Chrysler as a “division” of Daimler.
Schrempp testified Wednesday that the newspaper misrepresented his statements, but that he made no effort to get a retraction or correction.
Christensen noted that Schrempp also did not attempt to set the record straight in subsequent interviews the Financial Times and Barron’s.
Under questioning by DaimlerChrysler attorney Tom Allingham, Schrempp said his comments to the Financial Times in 2000 were an attempt to move beyond the merger and focus on addressing operational problems at Chrysler.
Schrempp said he considered Chrysler an operating division of DaimlerChrysler, similar to the Mercedes car and truck divisions.
Had initial talk about combining the two corporations focused on Chrysler’s status as an operating division, rather than its corporate status as a partner in a merger of equals, Chrysler employees would not have supported the transaction, he said.
“I never ever intended to do anything else but what was negotiated and contained in the business combination agreement,” said Schrempp.
Former Chrysler director Lynton Wilson, a Canadian who is a member of the DaimlerChrysler supervisory board, testified later Thursday that the merger made good business sense.
Attesting to his belief that the combination was a merger of equals, Wilson cited the roughly equal size of the companies, the even split between Chrylser and Daimler-Benz representatives on the DaimlerChrysler supervisory board, the similar initial split on the management board, and language in the agreement calling for co-chief executive officers for a period of three years.
Wilson said there was no guarantee that equality between Daimler-Benz and Chrysler representatives on the DaimlerChrysler management board would continue indefinitely.
“I would have been opposed to any quota system whatsoever. … Having restrictions on who can be appointed to what tends to fly in the face of who can do the best job,” Wilson said.