After the Split: Is Daimler Vulnerable to a Hostile Takeover?
The split between Daimler and Chrysler marks the beginning of a new era in the automobile industry, which has become vulnerable to the attacks of private equity investors for the first time. It's a threat that also menaces top brands like Mercedes.
Mercedes production at a Daimler factory in Sindelfingen, Germany near Stuttgart
Schrempp deserves reproach for all of this. How is it that someone who led a company into such a deep crisis deserves this kind of treatment? But Schrempp can only smirk at these kinds of accusations. The amounts in question are paltry sums compared to what he has made -- and still stands to make -- as a result of the merger with Chrysler.
The new world of stock options
In the year in which the merger deal was reached, Schrempp's salary jumped from an estimated 1.8 million ($2.42 million) to 4.5 million. More important, he received stock options that are now worth a fortune.
This form of compensation has become more common in Germany, especially after the merger between Daimler-Benz and Chrysler. It entitles executives to acquire stock at a predetermined price. Any rise in the price of that stock is pure profit.
No one other than Schrempp, and possibly his wife, knows exactly how many options he owns. One of the peculiarities of this compensation system is that while the actual salaries of senior executives are usually disclosed, the details of many stock option programs remain secret.
Not surprisingly, Schrempp has declined to comment on the issue. Hamburg business professor Michael Adams voices his concern that the former auto executive only received the options at such a low subscription price "because he drove the company into the ground." Schrempp, says Adams, can only stand to benefit if his successor manages to bring the stock price back up to its former level. The upshot, according to Adams, is that Schrempp "has become a rich man."
- Part 1: Is Daimler Vulnerable to a Hostile Takeover?
- Part 2: A Difficult Future for the Global Conglomerate
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