DaimlerChrysler Will Likely Send German Exec to Head Chrysler, Analysts Say

Updated from 12:45 p.m. EST

DaimlerChrysler (DCX Quote) will likely send a German executive to replace the chief of its Chrysler division, auto industry analysts said Tuesday, as the troubled car maker called a report of the management change speculative.

The potential shakeup, first reported in the Detroit News Tuesday, drew skepticism but little surprise on Wall Street. DaimlerChrysler's stock finished Tuesday regular trading up a penny to $46.40.

The newspaper, citing unidentified people at the company, said that James P. Holden, president and chief executive of DaimlerChrysler, was expected to resign as soon as Friday and that Dieter Zetsche, the head of the company's commercial vehicle unit, would replace him.

"When we have a story that's speculative, we're just not in a position to comment," said Lori McTavish, a spokeswoman for the company.

Several analysts said such a move would be unsurprising, considering the mounting troubles for the Auburn Hills, Mich.-based Chrysler division.

Last month, the Chrysler division reported a $512 million loss in the third quarter, its first operating loss in nine years. That dragged the German-American automotive giant's third quarter operating profits below Wall Street's expectations. It had warned in September that Chrysler would report losses because of deep discounting on new car sales and costs associated with new model introductions. During October, the company had idled seven factories in the U.S. and Canada for one week to cut vehicle inventories.

At the time, Holden attributed the difficulties to intense pricing competition, specifically sales and incentives, which he said had stymied Chrysler's ability to fall back on its once-usual 3 percent annual price increase.

The next day, Oct. 27, the company voluntarily recalled 1.4 million Dodge, Plymouth and Chrysler minivans, saying it had received reports of 43 leaking fuel rail seals. The setback was magnified by perception, as fears lingered from the summertime recall of 6.5 million minivan tires by Bridgestone/Firestone.

And little more than a week later, Moody's Investors Service revised its outlook on DaimlerChrysler to negative from stable, and said the Chrysler unit's operating performance will face ``sustained pressure'' amid softening North American demand for some of its high-margin vehicles. It cited slow minivan sales as particularly worrisome, noting their contribution to overall operating profits. DaimlerChrysler, the world's fifth-largest auto company by unit volume, is one of the largest U.S. corporate debt issuers. Another credit rating agency, Standard & Poor's, had already revised its outlook on the company to negative from stable.

The long-term ratings on DaimlerChrysler are one notch higher than those for General Motors(GM Quote) and Ford Motor(F Quote).

Holden, who has headed Chrysler for 12 months, has said that he expects market conditions to worsen next year but that the Chrysler division would return to profitability in the fourth quarter.

Zetsche's career path through the Mercedes division may have left him inexperienced in mass markets, especially American mass markets, said Rod Lache, analyst for Deutsche Banc Alex. Brown. He rates the stock market perform, the equivalent of neutral or hold.

"It sounds like senior management in Stuttgart wants to get some direct feedback on what's going on in Auburn Hills," Lache said. "The company's had a lot of turmoil, the entire management team has been replaced."

Still, the replacement of an American chief executive with a German could create new problems, Lache said, suggesting the company carefully weigh the "impact on morale on the old Chrysler people."