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Background
At 4:00pm on November 12, 1998 as the final bell rang on the New York Stock
Exchange, U.S. automaker Chrysler Corporation and German automaker Daimler-Benz
ceased to exist. They emerged the next day as a new global conglomerate named
DaimlerChrysler AG. With combined revenues of $130 billion and a market
capitalization of $92 billion, DaimlerChrysler became the fifth largest automaker in the
world in number of vehicles sold and third largest in sales. The $40 billion stock deal was the
largest ever in the industrial world. Upon completion of the trans action Daimler
s tockholders ow ned 57 percent of the new DaimlerChrysler and Chrysler
stockholders the remaining 43 percent. After ten months of discussions and negotiations
between the two companies, the merger was billed as a marriage of equals. It signaled new
levels of consolidation within the automotive industry and was heralded as the beginning of
a new era where only truly global players would survive. At the May 7, 1998 London press
conference officially announcing the merger, Daimler-Benz Chairman Jrgen Schrempp
declared,
This is much more than a merger. Today we are creating the worlds leading automotive
company for the 21st Century DaimlerChrysler AG. We are combining to merge the
two most innovative car companies in the world. We are committed to making
DaimlerChrysler the most innovative competitor this industry has ever seen, one that
will set the pace in the automotive world in the next Millennium. We are doing this merger
because we share a common passion for making great cars and trucks..by combining and
utilizing each others strengths, we will have the pre-eminent strategic position in
the global marketplace, for the benefit of our customers. We will be able to exploit new
markets, and thereby improve return and value to our shareholders.
Chrysler CEO Bob Eaton added,
1 | DaimlerChrysler Merger
We are leading a new trend that we believe will change the future and the face of this
industry. As a result of being among the first, we had the ability to choose our favorite
partners.
Schrempp was convinced the two auto companies could form a powerful partnership. He
recalled the first meeting with Eaton,
I just presented the case and I was out again. The meeting lasted about 17 minutes. I
dont want to create the impression that he was surprised. When the meeting was over, I
said, If you think Im nave, this is nonsense Im talking just tell me. He smiled and said,
Just give me a chance. We have done some evaluation as well and I will phone you in
the next two weeks. I think he phoned me in a week or so.
This was not the first discussion Daimler-Benz had with a U.S. auto manufacturer nor was it the
first time Chrysler had thought of combining with another major automobile company. In
1997 Chrysler and Daimler-Benz had studied the possibility of a joint venture to
merge international operations but the deal never came to fruition. Chrysler had
studied various combinations and recognized the need for global presence. The company
was financially healthy but industry overcapacity and huge prospective investment outlays
created a risky environment for global expansion on their own. Only a small number of
automakers, like Toyota, Volkswagen, Ford and GM had the capability to go global without
major acquisitions. Eaton had gone so far as to poll investment bankers on their ideas and
spoke with executives from BMW on this topic. In 1998 Ford pitched a merger plan of its own
to Daimler-Benz, unaware of the already ongoing talks between the German automaker and
Chrysler. Ford Chairman Alex Trotman acknowledged the talks but then suggested the
talks had not become very serious. But the Ford Chairman reportedly briefed both his
board of directors and the Ford family, which controlled 40 percent of the automakers voting
stock. It was the familys unwillingness to give up control that apparently ended the
discussions, a key reason why merger talks between Ford and Fiat a few years prior also
collapsed.
Schrempp and Eaton believed the potential benefits from joint product design,
development of new technology to meet emissions and fuel economy requirements, efficient
manufacturing, combined purchasing, other economies of scale and brand expansion
anddiversification would position the combined entity as a powerful global player. In
discussing the possibility of a business combination between Daimler-Benz and Chrysler,
they considered it essential that their respective companies play a leading role in the
process of expected industry consolidation and in choosing a partner with optimal strategic
fit. In this respect, both the timing of the proposed business combination and the selection of
the parties were considered highly appropriate in order to secure and strengthen their
respective market positions. Furthermore, since the companies had virtually no product
overlap there was little threat to immediate rationalization of product offerings.
Before DaimlerChrysler could hope to unseat GM or Ford, however, it had to create a
single company, keeping the best of both former companies in the areas of innovation,
cost savings, supplier relationships, quality and brands. The integration of the two
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companies was no small challenge. It required a blending of corporate and national cultures
and operations. Former Chrysler President Robert Lutz commented,
I do think that managing the cultural issues will indeed be the toughest part of making this
marriage work. And the challenge, as always, will be getting the cultures to really meld below
the level of senior-most management.
The task of integrating the two car companies fell to Chrysler President Tom Stallkamp.
Stallkamp had become Chrysler president effective January 1, 1998 just days before
Schrempp visited Eaton to plant the seeds for the historic merger. Despite the powerful
company the merger created on paper, Stallkamp knew the track record for such large
mergers, particularly cross border ones, was not good. A global report by KPMG at the time
indicated 83 percent of mergers were unsuccessful in producing any business benefit with
regard to shareholder value. Daimler- Benz had conducted its own study of previous mergers
and found that 70 percent had failed. The world auto industry had already experienced culture
clashes that ended various mergers and joint ventures. Autolatina, the Ford Motor Co.Volkswagen AG venture in Brazil and Argentina collapsed in 1995, the victim of
continued arguments over product plans between executives of the two automakers. A
proposed merger of Renault S.A. and Volvo AB also fell apart in 1995 due to extreme
resistance and cultural friction within each company. Merging two large
successful companies, incorporated in different countries, with geographically
dispersed operations, and with different business cultures and compensation structures
created challenges that were quite different from absorbing a smaller acquired company into
an existing structure.
The attention the merger garnered from the media, industry experts and Wall Street
created an environment of speculation. Everyone had an opinion about the merger and
its chances for success. Autoline Detroit, a weekly industry news show hosted a special onehour panel discussion on the merger. Csaba Csere, editor of Car and Driver magazine observed,
If they really want to integrate they need to figure out how their two different systems can
[blend]. Each side has a very proud history and each side thinks they know
something/have unique knowledge about how to do things. Paul Ballew, chief economist
at J.D. Power asserted, The greatest challenge of any major merger is the culture. It
probably will or should be the number one topic on their agenda for the next 3-5 years.
Stallkamp thought that,
The way you can make the merger work is to get people excited about finding
something new, rather than going back to defending their own turf. Its human
nature to fall back on whats familiar. We have to take away the fear of the
unknown by making it fun and exciting.
Both companies had a history of strong turnarounds and recent market success (see
Exhibit 1 for company histories), but all eyes were on DaimlerChrysler, as the price of failure
for the largest industrial merger in history would be immense .
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approach had not yet been expressly formulated or followed in Germany. The issues
surrounding quarterly reporting and focusing on stock price triggered lively debate. One
trade union representative expressed the opinion that the obsession with increasing
shareholder value rides roughshod over the interests of employees, the environment and society.
The Board also undertook an aggressive cost cutting program, which included layoffs of
thousands of workers, something unprecedented in Germany. A restructuring of the
headquarters group was initiated to reduce the bureaucracy and improve planning and
decision-making. Although significant reductions were made Daimler-Benz still
maintained a strong centralized corporate staff. At a January 1997 announcement of
the new group structure Schrempp announced, The new structure will make us fit for
the next century. But we still need a culture shock. The new structure gave business
unit managers more autonomy in running their businesses and increased accountability
for profits. Each business unit maintained its own staff. By 1997 the restructure had borne
its first fruit. For financial year 1997 Daimler-Benz reported an operating profit of DM 4.3
billion, a 79 percent increase over 1996.
Our strategy of orienting the group around units that are profitable and offer good
prospects for future growth has now borne its first fruit. We must also point out
however, that Daimler Benz has still only completed the first stage in its effort to reach
world best practice.
The significant changes at Daimler-Benz left many managers dazed by its rapid pace. Many of
the people working for the century-old company were unable to keep pace or keep track of
the changes going on around them. Schrempp, a driven and charismatic individual, earned
a reputation as a Rambo, partly due to the speed with which he demanded change and
partly because of his direct and sometimes severe nature. Schrempp responded, If Rambo
is someone who acts quickly and decisively, the image is an appropriate one.
By the end of 1997 the new structure was fully in place. Schrempp reported,
We had once again lashed the new organization down at a time when many in the
company thought that we were still in the change state. This meant that we had already
moved on to refreezing at a time when many thought that we were still in the unfreezing
and moving stage.
Daimler-Benz had forged a culture focused on (brand) image, quality, engineering,
profitability, and business unit autonomy.
Reflecting on the significant changes made at Daimler-Benz, Dieter Zetsche, head of
sales and marketing, concluded, In many peoples minds Daimler-Benz is this
traditional, conservative company of managers wearing dark suits and moving ahead very
slowly. I have to say that there are very few companies in the automotive industry that have
made as many rapid, daring and basic changes as Daimler-Benz.
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Product Creation
Purchasing
Marketing and Sales
Production Planning
Global Strategy-Integration
8 | DaimlerChrysler Merger
Corporate Development
Technology and Research
Information Technology
Finance and Controlling
Human Resource and Corporate Structure
Corporate Communication
Non-automotive Divisions
Commenting on the integration structure Stallkamp noted, We had our own team
internally that was getting ready for this, and they had their own team doing the same
thing independently. We have now married those two teams together.
Germans need for rules and order as maybe disinterest in doing something. What weve
worked hard to overcome and what Daimler and Chrysler will have to work hard to
overcome is the separation of Not Invented Here (NIH) syndrome. Both sides of the
ocean tend to think that what theyve come up with and developed is the best way to do
something.
Some close observers believe that the merger was a marriage of oppositesDaimler
embraced formality and hierarchy, from its intricately structured decision-making processes
to its suit-and-tie dress code and starchy respect for titles and proper names. Chrysler
shucked barriers and promoted cross-functional teams that favored open collars, free-form
discussions, and casual reparteeVirtually all the German executives spoke English. None
of the Americans, with the notable exception of Lutz, [retired Vice Chairman, forced out by
Eaton], spoke German.
DaimlerChryslers early integration efforts were focused on trying to identify the best
process for the new company. Its not our intent to say one side wins and the other loses, said
Stallkamp.
Take the different ways we conduct meetings. Our approach is more informal, with more give
and take. Theirs tends to be more formal, with a lot more work done in advance.
The differences in business culture were widespread, as basic as figuring out how
Daimler and Chrysler could share product information when the Germans take measurements in
centimeters and the Americans use inches, to as complex as ensuring market
competitive compensation systems on both sides of the Atlantic. In an effort to improve
the likelihood of integration success, Chrysler invited employees to take voluntary culture
training. The national cultures are less of an issue than business culture, and its more
important to get cultural training than language training, noted Stallkamp.
When asked about his approach to the integration Stallkamp responded,
More and more of my time, if you include the cultural side, is spent on integrating
the two companies. My job is to integrate them as much as possible, so we can get the synergies
we signed up for, to get one company out of two. The biggest challenge is the need for
face-to-face communications, rather than videophones. You need to meet people in
person, rather than long distance, so that means we have to travel more. You have to
socialize with each other, you have to meet after business meetings. Otherwise, the comfort
factor would keep pushing people back into their own (traditional cliques).
The pace of integration was also a concern to the DaimlerChrysler management. To be
fair we move faster and theyre much more analytical, said Stallkamp. That is one of the
issues. How fast do we go on this? This is a big deal, and we dont want to screw it up by
crashing some premature integration.
Schrempp added his thoughts,
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We have said to ourselves, lets rather make 80 percent correct decisions now and not
wait for the 100 percent decision which might not eventually happen. Because the whole
organization expects change. So if you do something now, they will say, yes its
necessary. If you do not act for 12-18 months the organization will again get into a
sort of stable situation. And then when you w ant to mo ve and change s o me thing
the y s a y wh y didnt the y do i t immediately?
concept of one manager having two jobs, for example the head of Mercedes-Benz also
heading DaimlerChrysler Engineering, did not make sense to the Daimler-Benz managers.
Even Schrempp himself asked, Who do you shoot when it doesnt work? DaimlerBenz managers were rewarded based primarily on the profit and loss results of their unit.
Chrysler managers were rewarded based on the success of their team and Chrysler. The
differences in compensation, particularly between Eaton and Schremmp -- one paid at the high
American CEO rate with ample stock options, and the other at much lower German salary -were often highlighted in the press. Further, Chrysler executives had rich termination
contracts, (golden parachutes), a practice not used in Germany.
In addition, Stallkamps title became an issue. In a German AG company there is no
president; all board members are considered equal. Even the CEO is not the boss, at
least not legally. Stallkamps title of president of DaimlerChrysler caused a
disturbance among many of the German managers, who questioned, Why is he called
president?
At the outset neither side was willing to give up its structure; many managers on both sides
wanted to be left alone to run their business units. Despite these major differences
Stallkamp believed there were opportunities to demonstrate the benefits of finding the
new way, stating, All we needed was a couple key processes to show the workforce that
it could be one company.
Stallkamps efforts to integrate the operational systems of the company soon hit another major
roadblock. Daimler-Benz managers, particularly those from Mercedes-Benz, were
extremely sensitive to the issues of brand image. Schrempp explained,
We had to keep brand identity and we see how we do it here. And before closing we were able
to come up with a great policy paper on how we wanted to do that, in every detail,
describing every brand, describing back offices, infrastructures, identities, etc.
The policy paper became known as the brand bible. The Germans pushed for the separation
of brands to extend to the back office activities. To the Americans, this seemed
unnecessarily conservative. Stallkamp recalled,
We had one discussion that lasted for three days. It was that we couldnt have our (Chrysler)
Mopar truck, from our after market parts division, arrive at a Mercedes dealer, even with
parts not identified as Chysler-connected. We had a protracted discussion on whether we
could even use white trucks and unbranded trucks! We wasted a lot of intellectual capital
and time on that issue.
Financial reporting and investor relations became another battleground. Over the previous
several years, the finance staff at Chrysler had implemented several major process
redesigns, and established itself as a world-class benchmark. It had received formal
recognition for these achievements from the U.S. business community. Its brushes with
bankruptcy had ingrained a disciplined approach to cash management. Daimler-Benz
had begun reporting according to US GAAP in 1995, but was still developing its approach,
12 | DaimlerChrysler Merger
particularly in the area of cash management. Since all cash was pooled it was difficult to
trace the sources and uses of cash for Daimler-Benz business units. This difficulty became a
sore point early in the merger. Chrysler executives couldnt believe, for example, that the top
finance official at Daimler-Benz could not produce or seem to understand the need for a
simple cash flow statement.
In addition Chrysler was adept at dealing with the investment community. It had significant
experience dealing with analysts, Wall Street and institutional investors. Daimler- enz on
the other hand did not have a strong relationship with Wall Street and followed a more
traditional approach to the investment community, reporting the required numbers and
avoiding significant attention. In addition to the internal 12 percent ROCE hurdle rate,
Daimler-Benz primarily measured revenue and number of personnel employed as
indicators of its size and success.
Chrysler also maintained an external focus with emphasis on quarterly reports and competitor
analysis.
Daimler-Benz was focused internally on achieving management by
objectives and maintaining decentralized responsibilities. Heated debates over methods for
data collection, data presentation and discussion with analysts marked some of the earliest
political battles within the new company. The Daimler-Benz financial head refused to
report a poor quarters earnings separately to Wall Street analysts, insisting on reporting
only the combined half-year results (which could be determined by subtracting the
previous quarters results from the total), despite dire warnings from Chrysler executives.
When brought in to the discussion, Schremmp declared that he wouldnt bother with
trying to please young, immature MBA analysts. The day after the public announcement,
DaimlerChrysler shares dropped 12 %.
The Daimler-Benz managers prevailed in many of the early arguments over positions and
functions, setting the tone for later debates and giving the impression that the merger of
equals was in fact a takeover. Stallkamp found himself personally embroiled in these
debates. Because Chrysler had no corporate staff to complement the staff at Daimler-Benz,
Stallkamp selected an employee to become part of his Operations Planning and Strategy Group.
He recalled,
I was summoned to the management board in Germany because a member complained I was
creating a strategic group and strategy belonged to Eckhard Cordes in Daimler-Benz
Strategic Planning Group. I said I was just trying to identify someone as a counterpart to
their guy and they said OK, but you cant call it strategy. That was one of the real turning
points in the political battle.
Changing even the minor business norms proved difficult. The use of overhead charts was a
tradition at Daimler-Benz. Presentations usually involved significant numbers of detailed and
complex flimsies, with many backup slides to address practically any question that might
be asked. Chrysler presentations, on the other hand, usually took the form of open and
pointed discussions with little advance preparation. Chryslers platform teams typically
gave updates using a single 12 point chart. Schrempp joked about the difference, The one
side a little more off the hip, the other side a bit more analytical, possibly too
analytical. And you know the wisdom might be somewhere in the middle.
13 | DaimlerChrysler Merger
Daimler-Benz employees also flew first-class in keeping with the companys luxury image. At
Chrysler only top officers could fly first-class. Like many other seemingly trivial issues,
the travel policy became a focal point and took more than six months to resolve. Issues
that should have been handled easily by the teams, such as labor relations, public
relations or differences in emissions control policies, were bumped up to the companys
management board for resolution. Even the size of the company business cards became
fodder for debate.
The difficulties in bringing the cultures together was perceived by many in the auto industry and
Wall Street,
Theres this view within this company that theres Chrysler guys and theres Daimler guys,
said Rod Lache, an analyst with Deutsche Bank Securities in New York. Although the
functions have been integrated, the cultures have not.
Stallkamps frustration with lack of progress on the integration began to take its toll. He
lamented,
Were missing a golden opportunity to shuck off the past. Were into this our way or their
way instead of saying what do we do right, what do they do right, and lets take only the
good stuff. The analogy is youre moving. Youre leaving home and you dont have enough
room in your new house --you have to throw away something. (You) dont drag all that
baggage with you to the new house.
trying to co-opt me to get Bob to leave and I told him I would never do thatBut it was
also like Schrempp saying, you and me, buddy, well make this thing work.
Stallkamp added that he knew the visit to his home was an important gesture, but being asked to
help get Eaton out was not a really fun assignment and one I found personally
distasteful.
A few months later, after an offsite meeting to discuss post-merger integration, Schrempp invited
Stallkamp to lunch in his suite.
Heres what were going to do, Schrempp said. You stay close to me. Call me whenever you
want. Dont worry about going through Bob Eaton, and all that kind of stuff.
Stallkamp felt intensely uncomfortable with the idea of circumventing Eaton. It seemed disloyal,
almost unethical.
I cant do that, he protested. I wont do that. I dont think its the right thing to do. I
wouldnt feel right.
Dont worry about it, Schrempp asserted.
As the merger and integration efforts moved forward, however, Eaton was no help because,
Stallkamp believed, he didnt like confrontation and had abdicated. So Stallkamp was left
to raise what he believed were some critical issues that he saw being handled incorrectly.
For example, after a while, the management board meetings were moved to New York to
reduce travel back and forth to Germany. Fancy suites at expensive hotels were held for
board members, even when they did not stay overnight. Stallkamp was worried that the
wrong message about spending was being sent to the Chrysler managers who were used to
traveling coach and staying at Holiday Inns. He circulated a critical memo, which
Schrempp immediately took offense at. he costs, Schrempp scolded Stallkamp, were
inconsequential. As president of the Chrysler unit and head of integration, he should be
spending more time on making the merger work than sweating meaningless details of
hotel rooms and the price of wine. Stallkamp backed off.
Another misunderstanding occurred when Stallkamp said to Schremmp, with admiration, that
Schremmp was not caught up in details and operated at 50,000 feet. To Schremmp this
was an insult, implying that he was not on top of things, and Stallkamp had to explain that he
had meant it as a compliment.
Soon after the merger was culminated, however, Stallkamp felt compelled to oppose Schrempp
on his plan for the potential acquisition of Nissan. Schrempp was excited about the
possibility of extending the companys reach into Asia, but Stallkamp and other longterm Chrysler executives were very concerned about whether the precarious new
DaimlerChrysler could handle the added integration burdens. Stallkamp wrote a three page
memo of opposition to the board, declaring that Nissan was going to go bankrupt and that it
15 | DaimlerChrysler Merger
would be better off doing so, since the world didnt need it. Schrempp was furious, but
ended up calling off the deal for Nissan when he realized how little support he had.
This led Schrempp to confront Stallkamp about block voting on the American side. At first
Schremmp maintained that creating an analytical team to prepare strategic reports for the
American executives was an attempt to vote as a block, though he eventually conceded
that it might be because the Americans had no staff while the Daimler executives did.
But then Schrempp argued that the Nissan decision was block voting, to which
Stallkamp exclaimed,
Thats bullshitWe all thought individually it was a stupid idea. There was no block
voting.
It was in this climate that Stallkamp was trying to figure out what to do about integration. Under
the watchful eye of the auto industry and Wall Street, Schrempp and Eaton pushed for
results and faster integration. It just didnt feel right to allow Chrysler to become one of 24
SBUs when it was half of the total company size, and other Chrysler executives were incensed
about the idea. Stalkamp felt an obligation to protect their interests. But he was beginning to
wonder if he should abandon the effort to create one company and let the power struggle
between the two systems continue so that the stronger would take over the weak, reverting
to a survival of the fittest approach. He was beginning to think there might be no other
solution.
16 | DaimlerChrysler Merger
Exhibit 1
Chrysler Corporation and Daimler-Benz Company Histories
Chrysler Corporation
In 1908 Walter P. Chrysler bought his first automobile, a Locomobile Phaeton. Not satisfied
with merely driving the car, he took the car apart and put it back together several times to
get to know its technology. In 1912 Chrysler became production manager at Buick Motor
Company, then a subsidiary of GM. From GM, Chrysler moved on to the Maxwell
Motor Company. In 1924 the first vehicle to bear the Chrysler name was unveiled. On
June 6, 1925 Walter Chrysler purchased the company he chaired, transferring all rights and
obligations from the Maxwell Motor Company to the new Chrysler Corporation. In 1928
Chrysler acquired Dodge Brothers, Inc. a company five times its size. In 1942 Chrysler
stopped civilian vehicle production in favor of war production.
Throughout the post-war period Chrysler nearly succumbed to the effects of the cyclical auto
industry. In 1979, with a huge inventory of low-mileage cars at a time of rising fuel prices,
Chrysler faced bankruptcy. Chrysler elected Lee Iacocca as Chairman to turn around
the company. In 1980, President Jimmy Carter signed the Chrysler Corporation Loan Guarantee
Act, providing Chrysler with $1.5 billion in federal loans. Chrysler faced bankruptcy again in
1990 but the Chrysler management team used the crisis to conduct a major restructure of
the business, returning Chrysler to profitability by 1992.
By 1997 Chrysler Corporation operated in two principal industry segments: Automotive
Operations and Financial Services. Automotive Operations included the research,
design, manufacture, assembly and sale of cars, trucks and related parts and accessories.
Substantially all of Chryslers automotive products were marketed through retail
dealerships, most of which were privately owned and financed. Financial Services included the
operations of Chrysler Financial Corporation and its consolidated subsidiaries, which were
engaged principally in providing consumer and dealer automotive financing for Chryslers
products. Chrysler focused heavily on trucks in its product line. In 1997, trucks, including
minivans, accounted for about 65 percent of Chryslers vehicle sales in the U.S. and cars
made up the remaining 35 percent. Chryslers brands included Jeep, one of the most
recognized car brands in the world, Chrysler, Dodge, and Plymouth. One of its most
successful products was the minivan, which Chrysler invented in 1983.
In 1997, minivans accounted for approximately one third of Chryslers truck sales.
Chryslers larger cars, such as the Stratus, were priced similar to Mercedes-Benz lower midsize car, the C- class. At the bottom end of the range Chrysler offered the Dodge/Plymouth
Neon. Its car product line included mass-market cars such as the Neon to niche vehicles such as
the Dodge Viper and the Plymouth Prowler.
Daimler-Benz A.G.
Gottlieb Daimler and Karl Benz were two rival German carmakers who went into th business at
the turn of the 20 century. While both Daimler and Benz achieved individual success
in the early 1900s, the challenge of rebuilding Germany after World War I, as well as
17 | DaimlerChrysler Merger
competing with the burgeoning Ford Motor Company, led the two companies to merge in
1926 to form Daimler-Benz. The company shifted to military production during World
War II, but Daimler began manufacturing cars again in 1947. By the 1980s, Daimler and its
Mercedes brand had become synonymous with premier quality and craftsmanship. Daimler
began a program of diversification in the mid-1980s, intending to transform the
company into a self-described
integrated technology group with product lines ranging from transportation to aerospace to
microelectronics to white goods. A string of largely unprofitable acquisitions in the late
1980s left Daimler unfocused and inefficient, culminating in a staggering DM 5.7 billion
loss for 1995 the largest peacetime loss ever by a German company.
Under the direction of the new chief executive Jrgen Schrempp, Daimler began to shed
unprofitable business units, to return the company to its core business of making high
quality automobiles and to move towards a more American-style management designed
to enhance shareholder value. Under Schrempps direction Daimler-Benz quickly returned
to profitability. By 1997, Daimler-Benz was the largest industrial group in Germany with
1997 revenues of DM 124 billion. Daimler-Benz operated in four business segments-Automotive (Passenger Cars and Commercial Vehicles), Aerospace, Services and Directly
Managed Businesses. Daimler-Benz was primarily active in Europe, North and South
America and Japan and continued to expand in markets such as Eastern Europe and East and
Southeast Asia, which were also assuming strategic importance as production locations.
In 1997, approximately 33 percent of Daimler-Benz revenues was derived from sales in
Germany, 25 percent from sales in other member states of the European Union and 21
percent from sales in the United States and Canada. The Automotive segment contributed
approximately 71 percent of Daimler-Benz revenues in 1997.
18 | DaimlerChrysler Merger
Exhibit 7
Executive Profiles
Thomas T. Stallkamp, President DaimlerChrysler AG
Stallkamps tenure as president of Chrysler Corp. was unexpectedly short. Stallkamp was
appointed Chrysler President in January 1998, just a few short months before the
surprising public announcement of the merger with Daimler-Benz AG. Some observers
said the merger couldnt have happened without the 52-year-old executive. Prior to taking on
the presidents post, hed overseen Chryslers global purchasing program. It was his job to
get the most for the more than $60 billion the automaker was spending for parts and
components each year. But Stallkamp did more than just demand good prices. He actively
sought to make suppliers part of Chryslers extended enterprise, taking on many of the
design, engineering and development chores traditionally handled in-house. The
process paid off by making Chrysler one of the worlds leanest and most efficient
carmakers. He was described as having an easy manner mixed with a wry sense of humor.
The reason he is so successful is because he has a small ego, says one longtime friend. His
keen sense of humor, often self-effacing attitude and my word is my bond ethic won him
the trust of Chrysler suppliers.
Tom has an unusual ability to get people to march in the same direction, said Jack Sights, an
executive with automotive glass supplier Guardian Industries in Auburn Hills.
Tom is sort of custom-made for this role he is playing said Robert Liberatore Chrysler Vice
President of Washington Affairs. He is an excellent listener, which is part of the skill set
you need when you bring two gigantic entities together.9
Schrempp valued decisiveness over protracted consensus building. Hes very much a dont
waste my time guy, commented Hypo bank auto analyst Thomas Aney. Schrempp counted
GE Chairman Jack Welch among his business heroes.
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