DaimlerChrysler Merger - The Quest To Create "One Company". Babson Case BAB 041.

BAB041
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DaimlerChrysler Merger:
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The Quest to Create One Company
Tom Stallkamp, Chrysler president and executive in charge of accelerating
integration of the recently merged Daimler and Chrysler companies, was feeling great
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frustration. Why couldnt he move the integration process along more rapidly? He could see
clearly the amazing potential for payoffs, but it just wasnt happening. He wasnt used to
being unable to move the organization, and he hated the feeling of being able to visualize
great things without being able to mobilize people to action. What else could he do? Maybe
it was time to let the two cultures duke it out, and allow the stronger one to win. That would
be one kind of integration, though not quite what he had been working for.
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Background
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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 transaction Daimler stockholders owned 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
Dianne C. St. Jean prepared this case under the supervision of Professor Allan R. Cohen, Edward A. Madden
Distinguished Professor in Global Leadership, Babson College, as a basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation. Note: unless otherwise indicated,
Tom Stallkamps quotes are excerpted from interviews with Babson case writers.
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DaimlerChrysler Merger BAB041
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,
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.1
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 and
diversification 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.
1
Taylor III, A., Gentlemen Start Your Engines, Fortune, June 8, 1998, pp. 140
2
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 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.2
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.3 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 one-hour
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.4
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.5
2
Lutz, R. (1998),GUTS: The Seven Laws of Business that Made Chrysler the Worlds Hottest Car Company, pp
98
3
Jrgen Schrempp discusses the transition, Detroit Free Press, January 8, 1999
4
Autoline Detroit Special, May 24, 1998
5
Eisenstein, P.A., Making one and one add up to three, Investors Business Daily, January 25, 1999, pp 3
3
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.
Potential Benefits of the Merger

For Chrysler and Daimler-Benz there were high hopes about a number of gains to be
achieved through their merger. Daimler-Benz was stronger in Europe; Chrysler, in North
America. Daimler-Benz had a global distribution network. Daimler-Benzs reputation for
engineering complemented Chryslers reputation for creative styling and product
development. Chryslers experience in dealing with US investors would help Daimler-Benz
become a pacesetter in bringing modern concepts of corporate governance and shareholder
value to the German economy. Chryslers freewheeling methods of vehicle development
would kick-start the more bureaucratic Mercedes-Benz. The combination with Chrysler

helped reduce the risk associated with Daimler-Benzs dependence on the premium segment
of the automobile market by introducing brand diversity. Daimler-Benzs financial clout and
technical prowess would bolster Chrysler in the auto wars. Moreover, the combined company
had greater financial strength with which to enter new markets. Exhibit 2 summarizes the
potential advantages of the merger to both.
Of particular importance was the need to improve Daimlers development time and
reduce development costs and the need to improve Chryslers quality and engineering.
Daimler-Benz typically spent 5 percent on R&D, compared to Chryslers 3 percent. As an

engineering company Daimler-Benz had high development costs. Mercedes-Benzs cost

structure was considered too high to make a reasonable return on cars below $20,000.
Mercedes R&D cost was over $2000 per vehicle compared to Chryslers $590 and it could
take as long as 60 days to build a vehicle in Germany (see Exhibit 3 for key performance
comparison for the 1997 calendar year). In addition the two companies had promised to
deliver synergies totaling $1.4 billion in 1999 and more than $3 billion by 2001. Commenting
on the areas for integration and savings Stallkamp explained,
Some things will be integrated right away, like global purchasing. Sales and
marketing will be among the first, though the brands will remain separate.
You wont sell Chrysler products at Mercedes dealerships or Mercedes
products through Chrysler. The integration will occur behind the scenes. The
next area is engineering. This was the area I was most concerned about. But
our technical people have come in and said lets find new ways of doing
things. The last area will be manufacturing, and thats driven by product. We
need more common product. Well never share the same platforms (between
Chrysler and Mercedes), never the same vehicles, but maybe common
components, like side-impact protection devices. This could save enormous
amounts of money.6
Exhibit 4 indicates the areas where synergies were expected. Achieving these
synergies required a focused effort to quickly integrate the necessary functions. Stallkamp
knew they had to deliver on the promised synergies but the big savings would come from the
combination of back office functions and the streamlining of systems and processes. He
envisioned separate marketing and sales to ensure brand integrity. On the operational side he
saw numerous opportunities for significant savings. A more strategically focused R&D
6
4
process would help drive technology transition, the sharing of design expertise from Chrysler
would keep DaimlerChrysler at the forefront of innovation, a single manufacturing
organization with separate plants would provide for the transfer of key manufacturing process
technologies and systems. DaimlerChrysler could leverage its unit volume to achieve
additional savings and streamline its systems. Bringing this vision to reality however was a
formidable challenge. Chrysler and Daimler-Benz had very different ways of operating.
Getting both sides to see the benefit of operating in a new way was critical to the success of
integration.
The Two Companies before the Merger
Recent Change and Structure at Chrysler
Reengineering expert Michael Hammer called Chrysler, overwhelmingly the most

innovative auto company in the world.7 Chrysler garnered this praise following company-
wide restructuring. Beginning in 1991, Chryslers management had bulldozed its traditional
functional organizational structure. It created platform teams for the whole organization,
assigning all functional employees to one of five teams, large car, small car, minivan, truck or
Jeep (see Exhibit 5 for platform team structure). Corporate staff was all but eliminated. The
executive vice presidents were co-located on one floor and were forced to work through
issues together. Chrysler established a matrix management structure for these senior
managers. Many of the traditional vice presidents were replaced with people who not only
had functional expertise but who were able to work together. Each vice president under the
new structure had two jobs, creating mutual dependence among them. In order for Tom
Stallkamp, then vice president of Procurement and Supply and general manager of Minivan
Operations, to obtain good designs for his minivans from Tom Gale, head of design, he
needed to provide supply chain support to Gale. Likewise for Gale to receive quality parts
from procurement and supply he needed to provide good designs for the platforms. This
teamwork ethic applied to the highest levels within Chrysler. CEO Bob Eaton was considered
to be one of the more modest chief executives in the world, a mild mannered and even-
tempered man who believed in the power of teams. Eaton and former Chrysler President Bob
Lutz, a dynamic and outspoken man, had formed a balanced partnership in running the
company. When Tom Stallkamp replaced Lutz as Chrysler president, it was believed his self-
effacing manner and ability to generate consensus would enable Chrysler to continue on its
successful path.
With the introduction of the platform teams, management focused on determining the
what -- the specific goals, objectives, constraints, and resources -- but the team would
determine the how. Teams were empowered to find the best way to deliver the results,
providing periodic progress reports to senior management. Chrysler soon began to reap the
benefits of its platform team concept and new structure; Chrysler became one of the most
profitable automakers in the world. Chryslers brushes with bankruptcy in 1979 and 1990
along with its radical restructuring had forged a culture dedicated to teamwork, speedy
product development, lean operations, cost leadership and flashy design.
7
Puris M (1999), Comeback: How Seven Straight Shooting CEOs Turned Around Troubled Companies, Random
House Inc NY pp 99
5
Eaton commented, Were trying to build a culture that is focused on continuous

improvement, setting tougher objectives and never being satisfied with where were at.8
Upon taking the position as Chrysler president, Stallkamp commented,
At Chrysler were all different personalities. What were trying to do is run

the company as a team like weve been doing. The speed in improving
quality, improving the company and the way we operate the business. Timing
is very important to us. Were very flexible. Were lean. The speed
energizes the people within Chrysler.9
Chryslers management wanted to ensure that speed and adaptability to change
remained part of the companys culture. Former Chrysler President Bob Lutz commented,
One of our greatest challenges is to prevent our people from thinking everything is OK

because Chrysler is no longer on the ropes.10 With respect to the use of platform teams,
Chryslers Vice President for Marketing Bud Liebler stated, At this point there is no way
wed be able to even think of managing without them. Nor would we want to.11 Eaton
summed up his thoughts,
Perhaps the most important attribute of any company today is to anticipate

change, and to move quickly to capitalize on it. Its all about speed and
flexibility. Its about converting ideas into profits, and doing it faster than our
competitors. Its about speed to market. Above all, we believe its about
passion - the passion for designing, developing and building the worlds
greatest cars and trucksEveryone is truly passionate about what were
trying to do.12
Recent Change and Structure at Daimler-Benz

When Schrempp took over as chairman in May 1995, Daimler was in serious
financial trouble. Many of its 35 business units were making little or no profit. Its traditional
slow bureaucratic structure and amalgamation of disparate businesses created an unwieldy
organization focused on its past successes. Significant levels of streamlining and restructuring
were needed. Schrempp created a new Board of Management with many new members who
would undertake the fundamental changes to the inherited structure. The Board was
determined to see the process through and to keep the momentum going. They attached great
importance at the outset to organizing the change process so that there was a clear division of
responsibilities with predefined tasks and priorities and, to keep friction to a minimum, as few
interfaces as possible.
The Board quickly carried out a streamlining of Daimlers business portfolio

trimming it to 23 strategic business units (see Exhibit 6 for Daimler-Benz structure). The goal
was to achieve a strong market position in first or second place in the world market in each
business. As part of the restructuring of the auto business, Mercedes-Benz was merged with
8
Sorge, M. and McElroy, J., Chrysler: Willing to Abandon Big Trucks, SUVs, Automotive Industries,
November 1997, pp 56
9
Autoline Detroit, Interview with Tom Stallkamp, January 18, 1998.
10
Autoline Detroit, Interview with Robert Lutz, February 8, 1998
11
Purvis, M. (1999), Comeback: How Seven Straight Shooting CEOs Turned Around Troubled Companies,
Random House Inc. NY, pp 96
12
May 7, 1998 Press conference, London, England
6
the Daimler-Benz group. Helmut Werner, the head of Mercedes-Benz and the man credited
with its success, was a vocal opponent of the move. He resigned soon after the decision was
made.
Profitability became a key measure for the company once restructured, business
units were required to earn a 12% return on capital employed in order to remain part of the
companys portfolio. In 1995, to improve financial transparency, Daimler-Benz began
reporting results externally based on US GAAP. In addition Schrempp and his new Board
began preaching the necessity for a strategy focused on shareholder value. This 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.13 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.14
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.15
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.16
13
Topfer, Dr. A (1999) Daimler-Benz, Strategic Realignment - Pacemakers to Success (Case 2), pp. 1
14
Topfer, Dr. A (1999) Daimler-Benz, Strategic Realignment - Pacemakers to Success (Case 2), pp 9
15
Topfer, Dr. A (1999), Daimler-Benz Strategic Realignment - Pacemakers to Success (Case 2), pp 10
16
Topfer, Dr. A (1999), Daimler-Benz Strategic Realignment - Pacemakers to Success (Case 3), pp 6
7
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.17
Initial Structure of Management and Integration Process
As a public limited company DaimlerChrysler like Daimler-Benz was required under
German law to have a Board of Management and a Supervisory Board. Based on the German
Co-Determination Law the Supervisory Board was comprised of ten shareholders

representatives and ten employees representatives. Five members from the Supervisory
Board of Daimler-Benz and five members of the Chrysler Board of Directors comprised the
new Supervisory Board. In order to assist the integration of the two companies, Hilmar
Kopper, then chairman of the Supervisory Board of Daimler-Benz, was named chairman of
the Supervisory Board of DaimlerChrysler for at least two years.
The Board of Management consisted of 18 members, eight from Daimler-Benz, eight

from Chrysler and two responsible for the Aerospace and Services divisions. Jrgen
Schrempp and Bob Eaton were to be co-chairmen and co-chief executive officers for a period
of approximately three years. Eaton announced at the outset of the merger that he would retire
within three years, causing considerable consternation at Chrysler, where he was seen as
having made himself a lame duck with considerable loss of power.18 DaimlerChrysler
President Tom Stallkamp was put in charge of the integration effort (see Exhibit 7 for
profiles of Schrempp, Eaton and Stallkamp). Chrysler also had employment continuation
agreements in place with each of its executive officers to cover a period of two years
following the merger.
The Board of Management formed a committee, called the Chairmans Integration

Council, the stated main task of which was to promote the integration of the two companies
(see Exhibit 8 for Integration Organization). It was anticipated that the Council would be in
place for two years. The companies prepared for integration through 29 Issue Resolving
Teams; later approximately 70 working groups were brought together to make
recommendations. Final decisions were left to the Board of Management. An overall
coordination team, called the Post Merger Integration Team (PMI) was also introduced and
headed by managers from both Daimler-Benz and Chrysler. The PMI reported to the
chairmens Integration Council and was responsible for ensuring integration occurred in all
areas. Integration teams fell into two categories, automotive, and non-automotive areas and
corporate functions. Each team was co-led by Daimler-Benz and Chrysler managers.
Automotive Integration Teams:

Product Creation
Purchasing
Marketing and Sales
17
Daimler-Chrysler Merger: Stuttgart reflects Daimler Benz image, The Detroit News, September 27, 1998
18
Bill Vlasic and Bradley A. Stertz, Taken for a Ride, William Morrow, NY, 2000, pp. 247-8
8
Production Planning
Global Strategy-Integration
Non-automotive and Corporate Functions Teams:

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.19
The Quest to Create One Company

After the May 1998 public merger announcement Daimler and Chrysler executives
initiated efforts to address the challenges of integrating the two companies. Since only a
handful of managers were taken into confidence during the negotiation phase the task of
bringing the management levels together needed to begin immediately. Commenting on the
unique blending of the two organizations, Chris Benko, managing director of Autofacts, a
division of PricewaterhouseCoopers stated, They have the best combination of creativity and
charisma plus bureaucracy and precision management. 20
Stallkamp commented, All 420,000 employees need to know weve left Chrysler
behind and weve left Daimler-Benz behind, he said. We will all be working for a new
company.21
Because of the intense scrutiny the merger was under, analysts and the media sought
out benchmarks in other major US-German mergers and acquisitions, of which there were
very few. In the May 24,1998 Autoline Detroit special, Dean Langford, President of OSRAM
Sylvania, the result of a 1993 acquisition of GTEs Sylvania by Siemens subsidiary OSRAM,
gave insight into the challenge of integrating German and American companies.
Americans are more free form in their discussions, a little less rigid. The
Germans tend to be very rigid, more methodological in their meetings and
thought processes. Americans have a tendency to sometimes go off on
tangents. With the Germans you dont have to worry about it. When they say
theyre going to do something and this is the agenda they stick to it.
Charles Jerabek Executive Vice President and General Manager of OSRAM Sylvania
added,
19
Vlasic, B. Transition Teams smooth the way for big merger, The Detroit News, September 3, 1998
20
Sorge M., DaimlerChrysler Makes Hay, Automotive Industries April 1999, pp 113
9
For the most part Germans dont understand the informalities of American
business, everything from casual dress days to drinking coffee throughout a
meeting. In that context they dont take the ideas presented as seriously as
they would if they were being presented in their own culture. On the other
side Americans often misinterpret the 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.21
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.22
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.23
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.
21
Taken for a Ride, p. 249
22
23
Phillips, D., From culture clashes to language shifts, execs craft alliances, The Detroit News, October 18, 1998
10
Otherwise, the comfort factor would keep pushing people back into their own
(traditional cliques). 24
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.25
Schrempp added his thoughts,
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 want to move and change something they say why didnt they
do it immediately?26
The Reality of Integration

The Chairmans Integration Council (CIC), ostensibly created to promote the

integration of the two companies, was in effect an attempt to get around the cumbersome
governance structure and run the company using a small group of leaders with a long-term
strategic focus. The formation of the CIC, however, met with immediate and equal
dissatisfaction from non-CIC members on both sides. These senior officers felt they were
once again being left out of the important decisions for the company. Stallkamp saw it as a
slap in the face to non-CIC members, and doomed to fail. The CIC met with such
retaliation that it was ultimately disbanded. Decisions reverted to the 18-member
management board. Schrempp, however, maintained a small cadre of loyal advisors, which
the Chrysler managers nicknamed his kitchen cabinet. This small group served as
Schrempps primary information network and sounding board for his plans. Topics to be
presented before the management board were often previewed by this group. This soon
included merger integration updates by the PMI team.
Stallkamp had intended to use the PMI team as the catalyst for process redesign.
Initially the PMI would identify low hanging fruit that could be used to achieve early
synergies. Since the PMI consisted of working level managers from each business unit, not
senior officers, Stallkamp believed the PMI could identify processes that, if redesigned, could
provide significant improvements and/or savings long term. The framework for process
redesign was to be similar to GEs Workout sessions; current systems would be detailed and
compared and then new systems developed containing the best aspects of the current ones.
Stallkamp and other Chrysler managers felt the PMI could be used to track synergies,
measure the morale and culture momentum, and identify new opportunities. Instead of
inventing a new best system, however, both sides spent significant time trying to convince the
other that their system was superior. The PMI soon became bogged down in the financial
accounting of the synergies that had been so publicly touted and its reports to the management
board soon were sanitized to discussions of the financials. The soft issues and new
24
25
Vlasic, B., Chrysler president custom-made to play mediator role, The Detroit News ,October 25, 1998, pp1
26
11
processes were not considered important by many of the German managers. Instead they
were focused on achieving their portion of the financial synergy target that had been allocated
to them.
The different philosophies of organizational structure became a contentious issue

early on. Chrysler had matrix management and platform teams and operated in essence as a
single strategic business unit. Daimler-Benz had a more traditional structure with direct lines
of authority and business unit autonomy for each of its 23 business units. The matrix 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? Daimler-Benz
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.27
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.
27
12
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,
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-

Benz 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
13
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.
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.28
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.
The Frustrations of Managing Up
Part of what made it difficult for Stallkamp to get full cooperation was that he had
very little contact with Schrempp: Because of the geographic distance it was hard to
establish a relationship with him. His kitchen cabinet of loyal underlings, who he met with
daily over drinks, was his information system. We all tried to minimize time away from the
office by learning to do trips to Germany in one day, flying overnight, meeting all day, then
flying back to Detroit to sleep at home.
A few months after the merger agreement but several months before it would be fully
completed, Schrempp had taken the very unusual step for a German manager of asking to
visit Stallkamp at his home. Schremmps secretary called Stallkamps secretary to say that
Mr. Schremmp would accept an invitation to Mr. Stallkamps house. Bewildered,
Stallkamps secretary asked him what to do. Stallkamp was also amazed, but went through
with the invitation. They talked for two hours, during which Stallkamp became uneasy.
28
Management shakeup raises questions at DaimlerChrysler, The Associated Press, September 27, 1999
14
Schrempp was reaching out...in a way that was a little uncomfortable.

[He] was already wondering when Eaton would leave DaimlerChrysler.
It was like, you and I are going to do this, dont worry about Bob,
Stallkamp recounted later. It was clear that he didnt want to be viewed as
throwing Bob outI thought he might be 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.29
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.30
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. The 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.31 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 long-term
29
30
31
Taken for a Ride; How the DaimlerChrysler marriage of equals crumbled, Business Week, June 5, 2000
15
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 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.32
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.
32
16
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 mid-size 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
business at the turn of the 20th 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
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
17
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
Exhibit 2
Potential Benefits to Chrysler and Daimler-Benz
BENEFITS TO CHRYSLER SHARED BENEFITS BENEFITS TO DAIMLER-
BENZ
Increases almost non- $1.4 billion in pretax cost Expands manufacturing
existent position in Europe savings expected in 1999, and dealership operations
$3 billion by 2001 in US
Improved quality from Purchasing power- Opportunity for joint
relationships with suppliers development at lower cost
Daimler-Benz
Halo effect of Mercedes Better capacity utilization Expands production ability

association in the US
Improve problem solving Technology transfer Combine with trucks, the

shared R&D innovation lighter lines from Chrysler
and schedule discipline
Uses some production Financial strength to enter Help align cost structure
capacity around the world

emerging markets
Improves technical Shared Transfer of design & styling

capability/quality, lower components/systems
warranty costs
Improved safety features Full product line from small Jeep adds to the Sport
to luxury Utility image
19
Exhibit 3
Performance Comparison of Chrysler and Daimler-Benz
Daimler-Benz Chrysler
Corporation
Cars Trucks Total
Annual volume 715 417 1,132 2,886

(000 of vehicles)
Sales $42,300 $52,700 $46,200 $19,730
Revenue/vehicle
Operating $2,460 $650 $1,790 $1,140

Profit/vehicle
R&D $2,430 $1,585 $2,120 $590

Costs/Vehicle
Productivity: 7.8 4.9 6.4 25.8

Vehicles/worker/
year
Hours/vehicle 216 343 262 75
Source: Harbour, J. Harbour and Associates, What Chrysler Can Do for Daimler, Automotive Industries, July 1998
Note: Currency represented in US $, at 1.78DM/$1.00
20
Total
Exhibit 5
Exhibit 4
Purchasing
Sales Increase
R&D/Platforms
Distribution/Dealership
New York: John Wiley & Sons Inc.

DaimlerChrysler Merger
Integration/Financial Services
Platform Team Organization

Source: DaimlerChrysler unification report, Autointell.com
for 1999
$202
$1,415
$506
$303
$303
$101
by 2001
$506
$3,618
$1,517
$303
$786
$506
Synergies of the Unification (in millions of US $, at 1.78DM/$1)
Source: Lutz, R.A. (1998) GUTS: The Seven Laws of Business that Made Chrysler the Worlds Hottest Car Company (pp.28).
21
BAB041
Exhibit 6
Daimler-Benz Organization
Daimler Benz -Corporate
Mercedes -Benz Daimler - Debis Directly
Passenger Cars Benz Services Managed
& Commercial Aerospace Group Businesses
Vehicles Group Group

Business Units
S-,E-,C-, Trucks Commerical Financial Rail systems

A -,M- Europe Aircraft & Services &
Class Helicopters Insurance
C.V. Microelectronics
NAFTA
Military IT-Services
SMART
Aircraft Diesel
Vans
Europe Engines
Defense Telecommunication
Drive Train Electronics & /Media
EU Defense Systems Services
Buses Propulsion Trading

Europe Systems
Space Satellites Real Estate

CV Latin
Management
America
Space
Unimog Infrastructure
22
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
Biography:
BA Miami University, Ohio, (1968)

MBA in Organizational Behavior, Miami University, Ohio (1972)
US Coast Guard supply and logistics officer (1969-1971)
Various purchasing and supply posts, Ford Motor Company, (1972-1980)
Chrysler:
General purchasing agent (1980)
Director of body trim purchasing (1983)
Director of production purchasing (1984)
VP of Marketing and Procurement for Acustar subsidiary (1988)
Chairman of Acustar (1988)
VP of Procurement and Supply (1990)
VP of Procurement and Supply and General Manager of large car/minivan operations (1991)
EVP of Procurement and Supply and General Manager of large car/minivan operations (1996)
President of Chrysler Corp. January, 1998
23
Jrgen E. Schrempp, Co-Chairman DaimlerChrysler AG
During his tenure as Chairman of Daimler-Benz, Schrempp proved to be a master of
boardroom politics, with the ability to make decisions quickly and the willingness to take
risks. He called these decisions digital decisions: uncompromising yes/no determinations
that a computer might make. He was responsible for significant restructuring and portfolio
rationalization at Daimler-Benz, returning the company to profitability in just one year. He
broke German business taboos through his tough labor negotiations, ordering huge layoffs to
try to turn the company around. His aggressive American style management practices and his
focus on shareholder value were not popular in many German business circles. Schrempp
characterized his methods stating, Nobody will ever spread a rumor about my having been
brought up at a girls boarding school.33 A driven and charismatic individual Schrempp
believed that business always comes before personal or career considerations. When he
announced the end to his 35-year marriage in 1999 he explained it by saying he wanted to

concentrate on making the merger a success. In an interview with a Dutch newspaper
Schrempp stated, This company needs me more than I need the company. Do you think
thats arrogant? I can tell. Write it down.34 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.
Biography:

Joined Daimler as an apprentice motor mechanic at the Mercedes-Benz branch (1967)

Attended university to train as an engineer (1967-1970)
Returned to Daimler and held various posts (1970s)
Appointed to management in the service division of Mercedes-Benz of South Africa (1974)
Appointed board member responsible for engineering at Mercedes-Benz of South Africa
(1980) President of Euclid, Inc., a 100% subsidiary of Daimler-Benz located in Cleveland,
Ohio (1982)
Vice President of Mercedes-Benz of South Africa (1983)
President of Mercedes-Benz of South Africa (1985)
Chairman of Daimlers aerospace subsidiary, Dasa (1989)
Replaced Edzard Reuter as Chairman of Daimler-Benz (1995)
33
Grasslin, J. (1999), Jurgen Schrempp: And the Making of an Auto Dynasty, McGraw-Hill, pp 69
34
Rothman, A. and Spiegelberg, R., The Seattle Times, May 7, 1998
24
Robert J. Eaton, Co-Chairman DaimlerChrysler AG
A no-nonsense engineer from Kansas, Eaton spent more than two decades climbing
the ladder at GM before jumping to Chrysler in 1992. Prior to accepting the Chrysler
chairmanship Eaton was running GMs vast European operations. Eaton was considered to be
one of the more modest chief executives of the world, a mild mannered and even- tempered
man who believed in the power of teams. His demure, less forceful manner was a significant
departure from Schrempps style. One GM executive commented that Eaton had a solid self-
worth without being on an ego trip, adding, You always know hes the boss but he doesnt
always push to the center stage. He approached problems in a direct, straightforward manner
and sought the advice of his management team.
Biography:
Graduate University of Kansas with Mechanical Engineering Degree (1963)

Drive line tester for the Corvette at Chevrolet (1963)
In charge of Corvair safety tests and Corvair accident recreation (1966)
Executive engineer (1973)
Assistant Chief Engineer at Oldsmobile (1979)
General Motors Vice President for Advanced Engineering (1982)
Head of GM Europe (1988)
Chairman and CEO Chrysler Corporation (1992)


25
Exhibit 8
DaimlerChryslers Management and Integration Structure
Chairmen
Chairmens Integration Council
Chrysler Diamler-Benz Finance Worldwide Daimler-Benz Strategy,
Passenger Passenger Purchasing Commercial Planning,

Cars Cars Vehicles Information
Extended Board of Management

Research & Sales DEBIS DASA Human Resources
Technology Daimler-Benz Services Aerospace Daimler-Benz

Purchasing Sales Strategy Design Human Resources

Chrysler Chrysler Chrysler Chrysler Chrysler
Integration Teams
Source: Automotive Intelligence, autointell.com
26

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utilizing each others strengths, we will have the pre-eminent strategic

Chrysler CEO Bob Eaton added,

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Before DaimlerChrysler could hope to unseat GM or Ford, however, it had to create a

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companies, incorporated in different countries, with geographically dispersed operations, and

Stallkamp thought that,

Potential Benefits of the Merger

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Daimler-Benz typically spent 5 percent on R&D, compared to Chryslers 3 percent. As an

engineering company Daimler-Benz had high development costs. Mercedes-Benzs cost

The Two Companies before the Merger

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Eaton commented, Were trying to build a culture that is focused on continuous

At Chrysler were all different personalities. What were trying to do is run

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Perhaps the most important attribute of any company today is to anticipate

Recent Change and Structure at Daimler-Benz

The Board quickly carried out a streamlining of Daimlers business portfolio

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Daimler-Benz had forged a culture focused on (brand) image, quality, engineering,

Initial Structure of Management and Integration Process

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The Board of Management consisted of 18 members, eight from Daimler-Benz, eight

The Board of Management formed a committee, called the Chairmans Integration

Automotive Integration Teams:

Non-automotive and Corporate Functions Teams:

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The Quest to Create One Company

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Take the different ways we conduct meetings. Our approach is more

When asked about his approach to the integration Stallkamp responded,

Schrempp added his thoughts,

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The Reality of Integration

The Chairmans Integration Council (CIC), ostensibly created to promote the

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The different philosophies of organizational structure became a contentious issue

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CoursePack code C-630-198253-STU

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competitor analysis. Daimler-Benz was focused internally on achieving management by

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I was summoned to the management board in Germany because a member

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The Frustrations of Managing Up

Schrempp was reaching out...in a way that was a little uncomfortable.

A few months later, after an offsite meeting to discuss post-merger integration,

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Stallkamp felt intensely uncomfortable with the idea of circumventing Eaton. It

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do. I wouldnt feel right.