Dieter Zetsche

German automotive executive Dieter Zetsche (born 1953) was credited with a sharp improvement of the fortunes of the United States-based Chrysler division of the DaimlerChrysler auto firm in the early 2000s. Zetsche's feats as a corporate turnaround artist, which went back to his days at the helm of the truck manufacturer Freightliner in the early 1990s, propelled him to the leadership of DaimlerChrysler in 2006.

Enjoyed Difficult Equestrian Sport

Dieter Zetsche (TSET-shuh) was born in Istanbul, Turkey, on May 5, 1953. His parents were German; his father was in Turkey to work in the field of bridge construction. When Zetsche was two, his family returned to Germany and settled in the Frankfurt area. He attended school in a Frankfurt suburb, and his penchant for attempting difficult balancing acts showed in his choice of sport as a teenager: he practiced the difficult activity of equestrian vaulting, which might be defined as doing gymnastics while mounted on the back of a moving horse. To earn extra money he drove a beverage delivery truck. Zetsche passed the German Abitur, or university entrance exam, in 1971 and entered the engineering program at the University of Karlsruhe.

When he received his degree in electrical engineering in 1976, it was roughly the equivalent of a master's degree in the United States. He went to work as an engineer in the research division of Germany's oldest automaker, Daimler-Benz, the makers of Mercedes-Benz automobiles as well as other automotive products, while doing work on a Ph.D. in mechanical engineering at the Technical University of Paderborn. He was granted the degree in 1982. Zetsche's first car was a 1971 Volkswagen Beetle. Shortly after finishing his education, Zetsche married his wife, Gisela; the pair raised three children.

By that time Zetsche had already advanced to the position of assistant to the chief engineer of Daimler-Benz's commercial vehicle division. His promotion in 1981 was the first in a rapid series of advances that would, within a decade, see him emerge as a leader in national and then international operations. Part of his career was spent on the truck manufacturing side of Daimler-Benz. He became co-ordinator for commercial vehicle development activities in 1984, and senior manager and chief engineer of the company's cross-country vehicle unit in 1986.

The following year, Zetsche moved to South America to head the engineering and product development departments of Mercedes-Benz of Brazil. His skill with foreign languages proved an asset to his career in the increasingly international auto business; he speaks six languages—German, English, French, Portuguese, Spanish, and Latin. In 1989 Zetsche was named president of Mercedes-Benz Argentina. He was credited with engineering a turnaround in Daimler-Benz's troubled operations there.

Headed Freightliner

In 1991 Zetsche came to the United States for the first time, as president of the Freightliner truck firm, owned by Daimler-Benz and headquartered in Portland, Oregon. His open, informal management style meshed well with American corporate culture, and he would later express the opinion that stereotypical differences between American and German corporate styles were often overstated. The results he achieved at Freightliner were rapid, involving the layoffs of some 3,800 workers. Over 14 months the company increased its market share and surged past rivals such as Volvo and Navistar.

Clearly now being groomed for the higher corporate ranks at Daimler-Benz, Zetsche returned to Germany in 1992. He became chief engineer of the development division for Mercedes-Benz, joining several of the company's sales management boards. He was seen as a protégé of Daimler-Benz chairman Jürgen Schrempp. The challenges the pair faced with the Mercedes-Benz auto line were substantial; once unchallenged as Europe's premier luxury auto nameplate, the company had suffered under competition from German automaker BMW and from Japanese upstarts Lexus and Acura, and had failed to introduce new models that caught the public imagination.

Much of the task of reviving Mercedes-Benz fell to Zetsche—and not only on the engineering side. Zetsche brought an informal new management style to the more than one hundred-year-old company, derived partly from his experiences in America but equally from his own relaxed personality. "My style is my style. It is who I am and how I am. I won't change that," he told Mark Landler of the International Herald Tribune. Zetsche took steps to bring senior managers closer to the day-to-day processes of product design, eliminating the Daimler-Benz executive dining room and moving managers' offices physically closer to those of other employees.

Under Zetsche's initiatives, the pace of new model introduction at Mercedes-Benz accelerated markedly. When Daimler-Benz merged with the Chrysler corporation in the United States to form DaimlerChrysler, a fusion billed at the time as a merger of equals but later widely viewed as a corporate takeover, Zetsche seemed to be a logical candidate to become chief executive of the new Chrysler group. He claimed to have no inkling that he was under consideration for the Chrysler top spot, but when Chrysler profits plummeted in the year 2000, Zetsche was tapped. "The company sees him as a highly respected turnaround guy who's handled problems before," auto analyst Jim Mateyka told Jeffrey McCracken of the Detroit Free Press.

Downsized Chrysler

Zetsche negotiated a path through the minefields that awaited him early in his tenure at Chrysler, including mistrust from longtime Chrysler managers wary of a strong new German presence in the company's Auburn Hills, Michigan, headquarters. Robyn Meredith of Forbes called Zetsche and chief operating officer Wolfgang Bernhard "two of the most hated men in Detroit" shortly after Zetsche's appointment. But Zetsche brought just a few senior German managers with him to the United States. Having suffered through losses of $3 billion in the five quarters leading up to Zetsche's appointment as CEO in the fall of 2000, the company was ripe for restructuring. Zetsche oversaw a difficult contraction that involved the elimination of about 40,000 jobs over several years, many through early-retirement packages offered to workers. Several Chrysler plants were closed. White-collar jobs were also cut, but the corps of engineers responsible for developing new product, a key group in any Zetsche turnaround strategy, were spared the worst of the cutbacks. And Zetsche won high marks for the way the layoffs were handled. "While Zetsche's decisions … were not popular," Landler noted, "no one could complain that they did not understand why they were happening."

By April of 2002, Zetsche's restructuring had begun to yield financial dividends, as Chrysler posted a profit of $111 million in the first quarter of that year, the strongest result within the entire DaimlerChrysler organization. During a period when the market share of American automakers was dropping sharply, Chrysler's rose from 12.6 percent in the last three months of 2001 to 13.6 percent in the first quarter of 2002. First-quarter profits rose to $366 million in 2003, receding only slightly to $327 million in the first quarter of 2004, by which time the company was considered to be out of the woods financially. Part of the credit went to the company's aggressively styled new Chrysler 300 luxury sedan.

Though a private and reserved individual, Zetsche proved to be a strong motivator of his American workforce. He parked in the employee parking lot at Chrysler headquarters and ate lunches in the company cafeteria, generally creating the impression of a leader focused on results. "The least productive thing you can do is to point fingers, always longing for the good old days," he observed in a speech quoted by Sarah A. Webster of the Detroit Free Press. Zetsche and his wife became closely involved in a number of Detroit-area community institutions and charitable organizations, directing millions of dollars in Chrysler contributions to the Detroit Institute of Arts and appearing in a commercial for the United Way.

By 2005 Zetsche had such a positive image in Detroit that there were rumors he might be poached for a top position by crosstown rival Ford. Clouds appeared on the horizon as increasing gasoline prices caused large unsold inventories of large Dodge and Jeep trucks and sport utility vehicles to build up on dealer lots. Chrysler responded with an advertising campaign featuring Zetsche himself as a comical "Dr. Z" character who touted the German engineering in Chrysler vehicles and dealt good-naturedly with joshing from callers concerning his large, instantly recognizable white handlebar moustache. The campaign failed to improve the situation much, but by that time DaimlerChrysler was facing more serious problems. The company's flagship Mercedes-Benz line was once again flagging. The company was barely breaking even, with a much-touted small car for the European market, called the Smart, losing money. Most ominously, quality problems began to surface in Mercedes cars, which had long had a reputation for reliability.

Zetsche, the company's turnaround specialist, was brought home to Germany to deal with the problems—displacing in the process his longtime mentor Schrempp, who retired. On January 1, 2006, Zetsche assumed the positions of chairman of the board of management of DaimlerChrysler and head of the Mercedes Car Group. Financial markets reacted positively to the appointment, with DaimlerChrysler stock rising more than 30 percent in the months after he took the reins. Zetsche began to apply some of the all-for-one, one-for-all symbolism that had worked well in Michigan, moving much of the DaimlerChrysler executive corps out of its plush Stuttgart headquarters and into a factory building.

In a situation far from the initial American fears of a complete German takeover of DaimlerChrysler, Zetsche installed several key North American managers in positions in Germany (since the 1998 merger, company business had been conducted in English). By late 2006 he had implemented a new, more centralized administrative structure at DaimlerChrysler that resulted in savings of an estimated $950 billion annually, and he laid the groundwork for the introduction of the Smart car into the crucial American market. More generally, he shook up the company's well-entrenched office politics. "Dieter is making an enormous contribution to the company culture by putting an end to the Stuttgart mentality of self-interest," one former Daimler-Chrysler employee told the Economist. The process of reinvigorating the DaimlerChrysler organization as a whole was expected to involve several years of work, but it was in the hands of a longtime "car guy" who seemed very little motivated by self-interest. In 2006 Time magazine named him one of 100 "People Who Shape Our World."

Books

International Dictionary of Business Biographies, 4 vols., St. James, 2005.

Periodicals

Automotive News, November 22, 2004; August 11, 2005; January 30, 2006; September 25, 2006.

Detroit Free Press, November 16, 2000; June 10, 2005; July 30, 2005.

Economist (U.S.), September 23, 2006.

Forbes, March 5, 2001.

Indianapolis Star, April 26, 2002.

International Herald Tribune, November 5, 2005.

Newsweek, December 5, 2005.

New York Times, July 18, 2006.

Online

"Dieter Zetsche," Ask Dr. Z, http://www.askdrz.com (January 2, 2007).

"Dr. Dieter Zetsche," DaimlerChrysler, http://www.daimlerchrysler.com (January 2, 2007).

"Resume: Dieter Zetsche," Business Week Online, http://www.businessweek.com/magazine/content/01_38/b3749005.htm (January 2, 2007).

"Time 100: The People Who Shape Our World, Dieter Zetsche," Time, http://www.time.com/time/magazine/article/0,9171,1187492,00.html (January 2, 2007).