DaimlerChrysler's chief looks ahead to a stronger future

Dieter Zetsche has a plea: "It doesn't help to discuss the past too much." It is an understandable request from DaimlerChrysler's chief executive.

His predecessor, Jürgen Schrempp, was the architect of Daimler-Benz's almost 27bn merger with Chrysler - the lossmaking US carmaker sold to buy-out group Cerberus this month. But one school of thought has it that many of Chrysler's troubles were due to decisions taken under the leadership of Zetsche, who was in charge at the unit for five years until 2005.

Two profit warnings in quick succession last summer caused many investors and analysts to question his strategy at Chrysler and wonder whether top management were spread too thinly between Germany and the US.

Zetsche denies any responsibility for the merger's failure, arguing that Chrysler is in much better shape than it was at the beginning of the decade. He certainly does not see the debacle as a resigning matter: "I feel good with where I am."

"Would I have preferred to see Chrysler being much more profitable today? Of course," he says, pointing out that things could have been worse.

"Is it good enough that Chrysler did much better in this period than Ford and GM market-share-wise, earnings-wise? This is a relative success - but of course it is not a success compared with the Hondas and Toyotas of this world."

Another school of thought sees Zetsche in a rosier light - as the man who deftly extricated Daimler from its failed American experiment. After enduring years of shareholders' complaints about Chrysler's drain on DaimlerChrysler's profits and management time, he executed the complex sale to Cerberus - the industry's biggest yet to private equity - just three months after announcing that "all options" were open on what to do with the US carmaker.

The sale of Chrysler garnered neutral or favourable press in the US - a large market for Mercedes cars - and won the endorsement of Ron Gettelfinger, the mercurial United Auto Workers president.

Unburdened of Chrysler, Daimler will now be a more focused and much more profitable company with control of one of the car industry's premier luxury brands and the world's largest truck group. As owner of 19.9 per cent of the new Chrysler, Daimler is even poised to profit from its erstwhile partner if Cerberus can turn it round. The Stuttgart-based chief's own future appears more secure than it did six months ago.@@page@@

Dieter Zetsche points to several other shareholder-friendly initiatives he has taken: from slimming down the lossmaking Smart small cars brand, to selling a stake in the EADS aerospace group and turning round Mercedes.

Asked whether shareholders could now put pressure on him over the €12bn in cash on Daimler's balance sheet, his message is - trust me. "You could make the case that this management over the past 18 months has some kind of track record of addressing things that have helped to create value . . . There might be some confidence that this is the driving logic going forward for this management as well," he says.

But the decoupling of Daimler from Chrysler has not solved all of Zetsche's problems.

Some analysts and investors now believe that more radical surgery is needed to unlock further value at Daimler. Some are agitating for a split of Daimler's Mercedes car and truck groups, which they say sit poorly together.

Moreover, lacking controlling family shareholders such as at BMW or Porsche, Daimler is now a cash-rich company with strong positions in two of the motor industry's most profitable segments, making it a possible takeover target.

Regulators in Europe and the US, meanwhile, have the group's large cars squarely in their sights as they legislate to reduce carbon dioxide emissions.

Zetsche, naturally enough, sees things differently.

A break-up makes no sense, he believes: "I do not see a benefit for the majority of our shareholders, other than the ones who have a three-month perspective, of splitting our company." Trucks will not be discarded: "Differently from the past, the truck industry seems to be as profitable as the luxury car market."

A private equity takeover of Daimler is dismissed almost out of hand, on the basis that Daimler's market capitalisation has risen by €30bn in recent months. "We feel dramatically less vulnerable than we did five months ago," he says.

Private equity buy-outs have been rare in the car industry so far, because so many companies have weak cash flows or controlling shareholders; Daimler is an exception in both respects.

But Zetsche says he feels comfortable with his shareholder structure, despite the lack of security that goes with it: "There's no certainty, never in business. It demands from us striving for top performance all the time."