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Zetsche Says Profitability Most Important

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Link: http://news.yahoo.com/s/ap/20050824/ap_on_...HNlYwMlJVRPUCUl

Tue Aug 23, 9:00 PM ET

DETROIT - DaimlerChrysler AG chief-to-be Dieter Zetsche says his priorities in an interim role leading the company's luxury Mercedes division will be much the same as when he took over struggling Chrysler five years ago — improving lagging quality and profitability.

The German-U.S. automaker last month named Zetsche, president and chief executive of its Auburn Hills-based Chrysler Group, to lead the entire company when CEO Juergen Schrempp leaves at year's end. Zetsche's move to Germany was expedited last week when the automaker said he would replace Mercedes boss Eckhard Cordes on Sept. 1, the day after Cordes departs the company after 29 years.

Speaking at a gathering of business leaders Tuesday evening, Zetsche said his goal at Mercedes will not be so much increasing sales, as making money and producing better quality vehicles.

"It's clear that we want to return to a level of profitability which is adequate for a premium car manufacturer," Zetsche told automotive journalists at the gathering, adding that "profitable growth is the name of the game."

Mercedes, once DaimlerChrysler's star performer, has seen troubled times lately. It's been hampered by quality issues, including a 1.3 million vehicle recall in April, as well as problems at its Smart compact car division. Its operating profit in the most recent quarter was off 98 percent from last year.

Meanwhile, with Zetsche at the helm, Chrysler has seen sales and profits rise significantly.

Zetsche declined to discuss specific plans for Mercedes, such as job cuts to trim costs, primarily because he said he's yet to even arrive on the job in Stuttgart.

Zetsche also wouldn't entertain how long he might remain atop Mercedes, though he noted, "I do not plan on anything short term."

Zetsche's duties will become even greater beginning next year when he takes over for Schrempp, architect of the controversial 1998 merger between Daimler-Benz and Chrysler Corp. The merged company has struggled, first with heavy losses at Chrysler and now with weak earnings at former cash cow Mercedes.

It has other troubles as well.

Last week, Germany's financial services watchdog, BaFin, said it was examining whether the automaker followed rules obliging it to release market-sensitive information quickly when it announced Schrempp's resignation in July.

DaimlerChrysler also disclosed in recent financial filings that the U.S. Justice Department was investigating whether the carmaker paid bribes to foreign officials with the knowledge of its senior executives. The criminal investigation is tied to an inquiry opened last year by the  Securities and Exchange Commission after an employee fired by the automaker said he was dismissed for complaining that the company was using secret bank accounts to bribe government officials.

Zetsche declined to discuss those matters.

He also wouldn't confirm a German newspaper report Tuesday that said DaimlerChrysler and rival Volkswagen AG are in talks about jointly producing a VW-branded minivan for the U.S. market.

Financial daily Handelsblatt, citing company sources, said the automakers were in talks about the new project, and that an announcement was likely at next month's auto show in Frankfurt.

Zetsche noted DaimlerChrysler already has agreed to use a Volkswagen-built diesel engine in some Dodge vehicles in Europe. "There are more talks than this engine, and they might lead to results, but we're not at a point of time where we could confirm or announce anything," he said.

Zetsche leaves a once-struggling Chrysler division that has improved dramatically under his watch. Chrysler reported an operating profit of $658 million in the second quarter, its eighth consecutive quarterly profit at a time when larger U.S. rivals General Motors Corp. and Ford have struggled.

Zetsche will be replaced at Chrysler by current No. 2 Thomas LaSorda. Chrysler executive Eric Ridenour will take LaSorda's place.

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