DETROIT – Dieter Zetsche (search) engineered a turnaround at Chrysler with a laser-like focus on creating new products and reducing costs. When he takes control of parent DaimlerChrysler AG (DCX) later this year, he'll surely keep those strategies in place as he deals with challenges such as weak earnings at Mercedes-Benz and limited growth in Asia, analysts say.
DaimlerChrysler announced Thursday that Zetsche, 52, will take over for chief executive Juergen Schrempp (search) at the end of this year. Chrysler No. 2 Thomas LaSorda will replace Zetsche as president and CEO of the Auburn Hills-based Chrysler Group.
DaimlerChrysler shares soared $4.29, or 9.8 percent, to close at $48.26 on the New York Stock Exchange (search).
Zetsche leaves a once-struggling division that has improved dramatically under his watch. On Thursday, 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. (GM) and Ford Motor Co. (F) have struggled.
Chrysler's revenue in the most recent quarter amounted to $15.8 billion, down slightly from $16 billion in the second quarter of 2004. Sales were up 4 percent in the United States and 3 percent worldwide, Chrysler said.
Zetsche told analysts during a conference call Thursday that it's too early to say what his priorities will be at DaimlerChrysler, but industry observers say he's likely to demand a renewed concentration on DaimlerChrysler's core automotive business.
Michael Robinet, vice president of global vehicle forecasting for auto consultant CSM Worldwide, said DaimlerChrysler has been sidetracked by non-automotive businesses, such as its 30 percent stake in European Aeronautic Defence & Space Co., which owns Airbus.
"The industry is so intensely competitive that if you take your eye off the ball for a moment, somebody is going to take advantage," Robinet said.
Robinet said Zetsche also must increase DaimlerChrysler's presence in growing Asian markets such as China and India, where it has fallen behind rivals like GM and Volkswagen AG.
Erich Merkle, an analyst with IRN Inc., said in addition to fixing quality problems that have prompted costly recalls at Mercedes, Zetsche could breathe new excitement into the luxury brand by promoting more radical designs, as he did with vehicles like the Chrysler 300C sedan.
Several analysts agreed Zetsche is the right person for the job. Zetsche and Nissan Motor Co. chief Carlos Ghosn are the two most sought-after executives in the auto industry, Merkle said.
George Magliano, director of auto research for Boston-based Global Insight, said Zetsche gained a reputation for working well with people at Chrysler after he was appointed CEO in 2000.
That doesn't mean Zetsche isn't a hard-nosed businessman. Since he announced a turnaround plan in February 2001, Chrysler has eliminated around 40,000 jobs and reduced costs by improving quality and trying to hold down incentive spending. In late 2003, Zetsche launched an aggressive plan to introduce 25 new or redesigned vehicles over 36 months.
"Walking in and tiptoeing around wasn't the right thing to do, and Zetsche didn't do that," Robinet said. "He made the changes that were needed but also made sure he took the best parts of the organization and worked with them."
Zetsche said he's proud Chrysler is in a better position than when he came and that he's leaving a strong management team, including LaSorda, in place. LaSorda, who joined Chrysler from GM in 2000, was named chief operating officer last year. Before that, he was vice president of manufacturing and was credited with achieving significant improvements in production.