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The Runway Is Clear For Deutsche Aerospace


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THE RUNWAY IS CLEAR FOR DEUTSCHE AEROSPACE

For most aerospace executives, 1993 is shaping up as the year of the ulcer. Airlines are canceling jet orders at every turn. There's a dearth of new defense contracts worldwide. And budget-conscious governments are reining in space programs.

But Jurgen E. Schrempp feels just fine. The hard-driving chief executive of Daimler Benz's $10.8 billion Deutsche Aerospace (DASA) unit, Schrempp is piloting Germany's big power grab in world aviation. In recent years, he has helped DASA acquire stakes in everything from fighter planes to engines to commuter aircraft. And in the process, he is challenging the dominance of the Airbus Industrie consortium--of which DASA is a member.

This looks to be Schrempp's best year so far. It started with a bang in January, when DASA joined forces with Boeing Co. to begin studying a new 650-to-800-seat superjumbo jetliner. France's Aerospatiale and British Aerospace jumped in with DASA. But it was amply clear that Schrempp had taken the lead. Next, DASA's Hamburg plant rolled out the first widebody Airbus jet ever assembled in Germany, an A321. Then, on Apr. 27, Schrempp signed a deal with the Dutch government to buy a 51% stake in regional jetmaker Fokker.

Even for an established player, such powerbrokering would win notice. But DASA didn't even exist until 1989. In a short four years, through a series of deals (chart), Schrempp has built a company that is in every conceivable branch of aviation. "He wants to see DASA and Germany play a large role in European and global aerospace," says Lawrence W. Clarkson, Boeing's vice-president for planning and international development. Schrempp's "a real game player . . . tough and very up front."

Schrempp also has his sights on an even bigger job. A gregarious manager who is fond of cigars and fine wines, he is seen as possibly the next chief or most aerospace executives, 1993 is shaping up as the year of the ulcer. Airlines are canceling jet orders at every turn. There's a dearth of new defense contracts worldwide. And budget-conscious governments are reining in space programs.

But Jurgen E. Schrempp feels just fine. The hard-driving chief executive of Daimler Benz's $10.8 billion Deutsche Aerospace (DASA) unit, Schrempp is piloting Germany's big power grab in world aviation. In recent years, he has helped DASA acquire stakes in everything from fighter planes to engines to commuter aircraft. And in the process, he is challenging the dominance of the Airbus Industrie consortium--of which DASA is a member.

This looks to be Schrempp's best year so far. Things started with a bang in January, when Schrempp joined forces with Boeing Co. to begin studying a new 650-to-800-seat superjumbo jetliner. France's Aerospatiale and British Aerospace jumped in with DASA. But it was clear that Schrempp had taken the lead. Next, DASA's Hamburg plant rolled out the first widebody Airbus jet ever assembled in Germany, an A321. Then, on Apr. 27, Schrempp signed a deal with management and the Dutch government to buy a 51% stake in regional jetmaker Fokker. The move "reshuffles the deck in Europe," says analyst Pierre Boucheny at Paris brokerage Ferri.

MOVING UP? Even for a long-established player, such powerbrokering would attract notice. But DASA didn't even exist until 1989. In just four years, through a series of deals (chart), Schrempp has built a company that's in every possible branch of aviation. "He wants to see DASA and Germany play a large role in European and global aerospace," says Lawrence W. Clarkson, Boeing's vice-president for planning and international development. Schrempp's "a real game player . . . tough and very up front."

Schrempp also has of Daimler Benz. Edzard Reuter, now CEO of the industrial giant and Schrempp's mentor, is scheduled to retire by 1995. Insiders say Schrempp's record in getting DASA airborne positions him to succeed Reuter.

MAJOR FORCE. But Schrempp vows to keep building his record at DASA. When Reuter set up the company, Germany was a second-tier player in aerospace. Today, DASA is the major force in European aerospace industry, pulling ahead of the French. Already, DASA has a 33% slice of the European Fighter Aircraft (EFA) project and 40% of Eurocopter, a joint venture with France's Aerospatiale. It's offering Aerospatiale, as well as Italy's Alenia, 25% stakes in Fokker, with DASA keeping 50%.

To be sure, Schrempp has some rough times ahead. After a small ($31 million) profit in 1991, DASA plunged into the red with a $213 million loss last year. Says Schrempp: "The market today is totally depressed, and in my book, it will remain so for another two or three years."

So he is vowing measures to keep DASA strong as the industry shakes out. In a shakeup last year, he cut head-office staff to 300 from about 700 and eliminated two layers of management. He vows further cuts. But the biggest challenge is in changing the mindset at companies that DASA has absorbed. At companies such as defense contractor MBB, "for decades, there was a culture of cost-plus and basically one customer--in Bonn," says Schrempp. "It was an incentive to raise costs."

That was a shock to Schrempp, who says: "All my life I've worked in globally competitive businesses." He's trying to keep it that way. When he was parachuted into DASA in 1989 from the No. 2 slot at Mercedes' truck operation, Schrempp swore he'd help wean Airbus from government subsidies and vowed to make DASA a bottom-line company. To U. S. trade negotiators, who complained that the consortium was juiced on handouts, it was braggadocio. But last fall, four years ahead of schedule, Daimler and DASA decided to forgo extra exchange-rate subsidies they had been receiving on Airbus from Bonn since 1989.

Schrempp's openness makes him popular in the U. S. But it creates suspicion in Europe. When Schrempp approached Boeing directly about the superjumbo project, Airbus Chief Executive Jean Pierson started waves of protest that he and Airbus were being frozen out.

'GET IN CLOSE.' Schrempp, who was sunning himself in Cape Town, South Africa, when the flap broke, makes light of it. "It's like playing chess: It's good to get in close to the enemy or the competitor," he laughs. Schrempp insists DASA will stay with Airbus on conventional widebodies. But on projects beyond that range, such as a new supersonic transport, he adds: "Neither the Europeans nor the Americans can do it alone. So I have to look for new partners."

But with DASA's stake in Fokker, Schrempp has effectively blocked plans Airbus might have for making smaller planes. Airbus has said it wants to offer a shorter version of the planned 130-seat A319. But with Fokker blanketing the 70-to-100-seat range, Airbus' Pierson will likely back off.

Just to be sure, Schrempp is trying to persuade France's Aerospatiale, which, like DASA, owns 37.9% of Airbus, to join the Fokker venture. Schrempp says DASA must be treated as "an equal, not a junior partner," in European aerospace. If he keeps this up, DASA may well be more equal than others in short order. FAST TAKEOFF AT DEUTSCHE AEROSPACE

MAY, 1989Created with Schrempp as CEO by joining planemaker Dornier and engine

maker MTU with two electronics divisions of AEG

DECEMBER, 1989Acquires 80% stake in Deutsche Airbus, the German partner in

Airbus Industrie

JANUARY, 1991Agrees with France's Aerospatiale and Italy's Alenia to develop

regional airliners

MARCH, 1991Takes 25% stake in venture with Pratt & Whitney to develop new

engines

MAY, 1991Forms Eurocopter with Aerospatiale to produce and develop civilian and

military helicopters

JANUARY, 1993Joins with Boeing and others to study feasibility of a $20 billion

superjumbo jet

MARCH, 1993Rolls out first widebody jet, an Airbus A321, assembled in Germany

APRIL, 1993Buys 51% stake in Holland's Fokker

DATA: COMPANY REPORTS, BUSINESS WEEK

John Templeman in Ottobrunn, with Patrick Oster in Scheveningen and bureau reports


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