Daimler & Chrysler

A Marriage Made in Hell

Mergers and Acquisitions

Merger
Result of an agreement between two
companies to join their operations
together.
Some key issues in mergers follow.
Communicati
on: Grapevine

Power and
conflict:
win-win
situation.

Culture:
Cultural fit.

Operations:
Processes

Success is Difficult to
Achieve
Studies of M & A integration report 60-75% fail (Source: KPMG,
2008)

Cultural and human resource issues are at least equal in

importance to financial factors in making a deal work (The
Conference Board, 2001)

E.g., Employees in firms that are acquired or merged report lower overall
job satisfaction, lower trust in management, and diminished sense of
job security (Gantz-Wiley Research, 2004)

Daimler
Founded in the year 1886 by Gottlieb Daimler and
Carl Benz.
125 years later, in anniversary year 2011, Daimler
AG is one ofthe
worlds
most successful
automotive
With
its divisions
Mercedes-Benz
Cars,
companies. Daimler Trucks, Mercedes-Benz Vans,
Daimler Buses and Daimler Financial
Services.
The Daimler Group is one of the
biggest producers of premium cars
and the worlds biggest manufacturer
of commercial vehicles with a global
reach.
Daimler Financial Services provides its
customers with a full range of

Chrysler

With the resources, technology and worldwide distribution network

required to compete on a global scale, the alliance builds on Chrysler
Groups culture of innovation, first established by Walter P. Chrysler in
1925, and Fiats complementary technology that dates back to its
founding in 1899.
Chrysler Group produces Chrysler, Jeep, Dodge, Ram, SRT, Fiat and
Mopar.
Chrysler Groups product lineup

features some of the world's most

recognizable vehicles, including the
Chrysler 300, Jeep Wrangler, Dodge
Challenger and Ram 1500.
Fiat
contributes
world-class
technology,
platforms
and
powertrains for small- and mediumsize cars, allowing Chrysler Group to
offer an expanded product line
including environmentally friendly
vehicles.

Daimler Chrysler

On Nov. 12, 1998, Co.

completed
a
business
combination agreement with
Chrysler Corporation.
The $75 billion industrial merger
creates Daimler-Chrysler AG, an
international transportation and
services company that ranks as
the world's third largest
automobile company based on
1997 revenues.
The
enterprise
will
have
operational
headquarters
in
Stuttgart (Germany) and Auburn
Hills, MI (USA).
The Deal of the Century
Automotive Industries, June
1998

The Merger Was Welcomed by Auto

Analysts and Consumers
The
worlds
manufacturer (GM

third
1st, Ford

largest
2nd)

auto

Over $154 billion revenue, over $5.6

profit.
Mercedes-Benz ranked as the most visible
luxury brand.
Chryslers success in low-end/sub-compact
cars and trucks .

Daimler-Benz and Chrysler Corporations

strengths in 1998
Daimler-Benz
Mercedes is the most popular luxury brand
A strong dealer network
Ranked #17 globally

Chrysler Corporation
Low-end/sub-compact cars and trucks
Big auto manufacturer in North America
Mini-vans, Jeep and Dodge trucks
Ranked #25 globally

Reason behind Merger

Chrysler's
primary
reason
for
teaming with Daimler-Benz is to
extend its international reach
The goal of the merger :
Expected huge savings by combining
purchasing and other operations
Reduce total research and development
costs

Marriages Not Always Made in

Heaven

Corporate Cultures
Daimler
Management processes of
planning, organizing and
controlling. More conservative,
efficient and safe.

Chrysler
Setting goals, directing and
monitoring implementation. Known
as the risk-taking underdog

Cultural challenges
Differences in working styles, leadership

approach
National culture differences
Behavioural differences

Customer proposition
Daimler
The driving image and
experience associated with
the highest quality available
in the market

Chrysler
Attractive, eye-catching
design at a very competitive
price

Value chain
Daimler
Emphasis on
engineering, design,
quality
and after
sales service
Chrysler
High volume, low cost
manufacturing and
distribution

People Issues
Key members of

management team
leaving
Employee moral and

motivation
Retention of key staff
Consultation with staff

and representative
bodies

Others issues

Daimler controlling 57%, in what was perceived to be a merger of

equals.
Though strategically, the merger made good business sense. But
contrasting cultures and management styles hindered the realization
of the synergies.
Daimler-Benz attempted to run Chrysler USA operations in the same
way as it would run its German operations.
Daimler-Benz was characterized by methodical decision-making. On
the other hand, the US based Chrysler encouraged creativity.
While Chrysler represented American adaptability and valued
efficiency and equal empowerment Daimler-Benz valued a more
traditional respect for hierarchy and centralized decision-making.
Three years later DaimlerChrysler's market capitalization stood at
$44 billion, roughly equal to the value of Daimler-Benz before the
merger13. Chrysler Group's share value has declined by one-third
relative to pre-merger values.

Learning from DaimlerChryslers

post merger problems and
blunders
Importance of company culture integration.
Importance of a clear and correct target.
Importance of customers and demands.
Importance of the association between theories and
practice
Importance
executives

of

corporation

especially

the

Importance of knowing the market and the partner

top

Conclusion
Compelling business reasons need to drive mergers and acquisitions
Peoples concerns matter, addressing them is as important as other factors
in M & A activity
Meaningful involvement in the execution of the change has the most impact
on employee cooperation and commitment
Continually clarify direction, and communicate extensively, candidly, and on
ongoing basis
Treat people fairly, and design systems and processes that can flex with the
needs of the organization
OB practitioners have a clear role in guiding and supporting change
processes and change leaders in M & A activities
These pitfalls of mergers and acquisitions challenge today's leaders to a new
standard of managing change. The strategy is clear - accelerate, concentrate,
adapt, and in the case of international M&As, consider cultural differences. The
human and cultural issues that separate the 17% from the 83% are not about
some abstract values or the "soft stuff", but the concrete reality of productivity,
economic value and sustained growth.

http://oica.net/category/production-statistics/
Organisation Internationale des Constructeurs
dAutomobiles (OICA).
Date Source: KPMG