Reuter reflections spill the Daimler beans

 

The usually stuffy world of German business took on the characteristics of a school playground in recent weeks as some of the country's biggest boardroom hitters launched into a spirited bout of name-calling and mutual denigration.

The man at the centre of the controversy is Mr Edzard Reuter, the former boss of Daimler-Benz, who has shocked former colleagues with a candid memoir of his rise and fall.

One of his predecessors at Daimler-Benz is exposed as having depended on pharmaceutical stimulants and sedatives to help him through the trials of corporate life.

Another former colleague is accused of suffering from severe psychological problems and Reuter's successor at Daimler-Benz, Mr Juergen Schrempp, is described as possessing a "ruthless brutality".

When Mr Reuter was driven from his post in 1995, Daimler-Benz posted a loss of DM5.7 billion (£2.3 billion) and his dream of creating an "integrated technology group" lay in ruins. Within a year of his departure, the company made a remarkable recovery, turning the loss into a DM2 billion profit.

After two decades as a media darling, Mr Reuter was denounced in Germany's business pages as the most destructive manager in the country's history. His book Schein und Wirklichkeit (Appearance and Reality) is an attempt to tell his side of the story and to settle a few scores.

Mr Reuter was always an unlikely figure to lead Daimler-Benz, traditionally one of Germany's most conservative and hierarchical companies.

The son of the legendary, Social Democrat mayor of Berlin, Mr Ernst Reuter, he was regarded as dangerously left-wing by older managers when he arrived at Daimler-Benz headquarters in Stuttgart in 1972.

Within a few years, Mr Reuter was being hailed in the press as "a cult figure of modern capitalism", whose lean, ascetic appearance reinforced the impression of a sensitive intellectual at large in the boardroom.

More in tune with public opinion than most of his colleagues, Mr Reuter was the first important figure in German business to understand the depth of popular concern about damage to the environment.

As early as 1979, when most industrialists regarded green issues as the preserve of wildeyed, long-haired student protesters, he declared that taking responsibility for the environment was a primary task for every business.

Throughout the 1970s and in the early 1980s, Mr Reuter rejected offers to head some of Germany's biggest companies, including Lufthansa, Volkswagen and Veba. But he preferred to remain within the inhospitable atmosphere of Daimler-Benz, a decision that was rewarded in 1987 when, at the age of 59, he was promoted to the top of the company.

Supported by Deutsche Bank chief, Mr Alfred Herrhausen, who chaired the advisory board of Daimler-Benz, Mr Reuter initiated a bold expansion strategy, taking over giants such as AEG, MBB, Dornier and Fokker to create a massive technology conglomerate.

Mr Reuter's first blow came in 1989 when Mr Herrhausen was assassinated and he was left without a key ally.

Mr Herrhausen's successor at Deutsche Bank, Mr Hilmar Kopper, was less impressed by Mr Reuter's plans and backed board members who called for the company to focus on its core business manufacturing motor cars.

"Kopper is an honourable man, apart from his cowardice," is Mr Reuter's withering assessment of the banker.

By 1995, many of the components of Mr Reuter's "integrated technology group" were in a parlous state and the aircraft manufacturer, Fokker was close to bankruptcy.

Mr Reuter blames his colleagues for the failure of his grand plan, arguing that they were too mesmerised by the "shareholder value" ethos promulgated by such business icons as General Electric's, Mr Jack Welch.

He argues that his strategy could have been successful if only he had been given the full backing of the board and the banks.

Mr Reuter's successor, Mr Juergen Schrempp, embraced the new creed of putting shareholders' profits before all other considerations, leading a small revolution in the German business world.

Along with Mr Kopper, Mr Schrempp began to question the efficiency of Germany's postwar business model, based on good industrial relations and a commitment to the long-term economic welfare of society.

For Mr Reuter, shareholder value is nothing more than crude, thoughtless capitalism which respects neither people nor institutions.

which was Mr Schrempp's idea. He will win few friends and may make new enemies with his self-serving memoir but, as the evangelists of "shareholder value" sweep through Germany, he has provided a useful defence of an alternative business philosophy.

The troubles that afflicted Daimler-Benz are not the responsibility of one man; nor can one manager claim credit for the recovery. Perhaps, as the former VW boss Mr Carl Hahn once observed, managers are never as good as journalists imagine but they are never quite as bad either.