Straight From The Top

Automotive Industries,  Nov, 1999  by Marjorie Sorge

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Eaton claims it's only a temporary snag, blaming communications problems with the media and Wall St. "The key to turning around that image is products and financial results, and we are going to do that," he says.

He could be on the way. DaimlerChrysler earned $1.6 billion in the third quarter, far exceeding analysts' projections. Chrysler's automotive division had record revenues of $16.1 billion for the period, much of that due to the strong performance in trucks and SUVs. Revenues for Mercedes and Smart were $9.8 billion, up 15% for the 1998 third quarter. Plus DaimlerChrysler made $1,612 profit per vehicle during the June-to-September sales period.

That compares to lower-than-expected earnings of $1.5 billion in the second quarter, which drew more analysts' flak over future earnings potential.

Any company can have a bad quarter, but DaimlerChrysler's stuck out because it changed the way it dealt with the analysts, Eaton explains. Before the merger, for example, Chrysler shared quarterly production and incentive estimates with Wall St., as do Ford and General Motors. The Daimler side was worried about divulging competitive information. Consequently, the practice stopped.

"We wanted to be common with Mercedes in that regard," Eaton says. "Frankly, if you aren't doing this you don't want to start, because it tells your competition what you are building and where the pressures in the marketplace are going to be."

Seemed like a logical conclusion, but without that data the financial community was down on DaimlerChrysler. Faced with the consequences, the automaker resumed sharing the information with Wall St. but the company has decreed that only Eaton, Juergen Schrempp and CFO Manfred Gentz can talk about corporate financial issues to make certain data is consistent.

Eaton is also telling analysts that DaimlerChrysler's cost cutting is on track. "We are looking at attacking, not only supplier and manufacturing costs, but our overhead costs throughout the entire company," he says. "There is plenty of opportunity." No target for 2000 has been set yet, but he says they've surpassed the $2 billion goal set for the SCORE (Supplier Cost Reduction Effort) program and the $1.4 billion synergy target.

Next year also promises to be a big product year for DaimlerChrysler including the new RS minivan, PT Cruiser, Sebring/Avenger, four-door Dakota, C-Class and CL coupe.

While the financial side of the house may be fighting itself, difficulties on the people side - specifically, shattered morale - need to be addressed. The announcement that President Tom Stallkamp will leave at the end of the year and marketing guru Jim Holden will take over sent shock waves through Auburn Hills and threw many company stalwarts into a funk. But Eaton says the timing was right.

"Tom was ultimately thinking about retiring and now was the right time," he notes. "He's happy. I'm happy. Holden is happy ... Jim is going to be a great president and a great leader of this company. I don't have any concerns."