THE DAIMLER-CHRYSLER

MERGER

+
 CORPORATE STRUCTURE

 Daimler
 Hierarchical Structure


DAIMLER - CHRYSLER MERGER

 Chrysler
 Team-orientated



 CORPORATE CULTURES

 Daimler
 Management processes of planning, organizing
and controlling. More conservative, efficient and
safe.

DAIMLER - CHRYSLER MERGER



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

 Daimler
 The driving image and experience
associated with the highest quality available
in the market
DAIMLER - CHRYSLER MERGER

 Chrysler
 Attractive, eye-catching design at a very
competitive price

 VALUE CHAIN

 Daimler
 Emphasis on engineering, design, quality and
after sales service

DAIMLER - CHRYSLER MERGER
 Chrysler
 High volume, low cost manufacturing and
distribution

 DAIMLER-BENZ TIMELINE

1886 Carl Benz obtains patent for a horse carriage with an engine
1926 Daimler and Benz are merged into Daimler-Benz AG. The company produced cars,
trucks, airplanes and boat engines
1959 DB present in 143 countries
1967/68 Purchase of Krupp Heavy Trucks and Hanomag Henschel Trucks
mid 1970s Mercedes-Benz produced 3 million cars and 1 million trucks. Mercedes-Benz considered
one of the top 10 valuable brand names in the world.
1985 Daimler-Benz decides to diversify and acquires AEG. Goal was to convert Daimler-Benz
into an integrated technology company
1989 Acquisition of Messerschmitt Bolkow Blohm(MBB) the largest German manufacturer of
aerospace and defense equipment

DAIMLER - CHRYSLER MERGER

1993 Acquisition of Fokker. DB makes its first loss since 1945.Diversification questioned
1995 Jurgen Schremppbecomes CEO and reverses the diversification strategy. Schrempp
was the former boss of the aircraft division got the job as he the image of a
1996-97 Divestiture
“turnaround”– Schrempp
manager. got rid of 10 divisions, including the airplane-maker Fokker.
Schrempp also emphasizes globalization. Stated goals were to increase the proportion of
1997 Mercedes-Benz is the
foreign production to world
25% ofleader for(from
volume trucks5%
– sold under the MB, Freightliner, Sterling
in 1995)
and Unimog brand names while buses sold as MB and Setra names
 CHRYSLER TIMELINE
1920 Walter P. Chrysler leaves Buick and sets up Chrysler
1924 Introduction of the first Chrysler vehicle
1930 Opening of the Chrysler Building in New York, the tallest building at that time
1950s Chrysler vehicles increase in popularity and market share ranks second in the US
1963 Chrysler purchases the majority stake of Simca, France in order to penetrate the
European market
1978 Simca is sold to Peugeot
1973/79 Oil shocks cause steep decrease in sales and pushes Chrysler on the brink of bankruptcy
1980 Lee Iacocca, has to turn to Washington for for government loans in order to avoid
1983
1987
DAIMLER - CHRYSLER MERGER
bankruptcy
K Car platform strategy introduced. Record profits enables Chrysler to pay back
government loans several years before due date. Popular minivans introduced in the
Acquisition of American Motors – including the Jeep brand
market
1993 Robert Eaton replaces Lee Iacocca
1990-97 Sales more than doubled. Popular product range, profitable SUV, minivans and light
trucks along with lean manufacturing resulted in excellent profits. However performed
poorly in the car segment
 CHRONOLOGY OF EVENTS IN THE DCX
MERGER
January 12, 1998 Schrempp and Eaton met to discuss the possible merger

May 6, 1998 Merger agreement was signed in London

May 7, 1998 Merger agreement made public. Surprised the business community, including the
employees of Daimler Benz and Chrysler. Only 20 -30 managers were in the
“loop”

May 14, 1998 Daimler-Benz Supervisory Board OKs the merger

DAIMLER - CHRYSLER MERGER

July 23, 1998 European Commission approved the merger

July 31, 1998 Federal Trade Commission approved the merger

August 6, 1998 DaimlerChrysler announced that their shares would trade as “global stock”
instead of ADRs

September 18, 1998 97% of Chrysler shareholders and 80% of Daimler-Benz shareholders approved
the merger

November 12, 1998 Merger completed

POST DAIMLER-CHRYSLER
MERGER
 Daimler-Benz luxury vehicles had
captured less than 1% of the
American markets.
DAIMLER - CHRYSLER 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

DAIMLER
costs - CHRYSLER MERGER
 PROXY STATEMENT OF THE MERGER

 Specified the financial targets

§ Savings of $1.4 billion in the first year.
§ Annual benefits of $3 billion within 3 to 5 years


DAIMLER
Clearly defined-aCHRYSLER

MERGER
framework for the post merger phase
§ Speed was priority number one
§ Accountability and transparency
§ All top managers involved in the process
 MISSION

 Purpose is to be a global provider of automotive and

transportation products and services, generating superior
value for our customers, our employees and our share
holders.


 DAIMLER - CHRYSLER
Mission is to generate two great. We willMERGER
accomplish this by
consistently delighting our customers with the quality and
innovation of our products and services
 GOALS

 Delighted customers
 Superior profitability
 Unique portfolio
DAIMLER -growth
CHRYSLER MERGER
 Sustained

 Integrated enterprise
 Globalization
 VALUES

Customer Focus

Quality

Innovation

Speed

Teamwork

Excellence

DAIMLER
Inspiration
 - CHRYSLER MERGER
Profitability

Openness

Responsibility

Agility

 MONITORING THE INTEGRATION

 The Chairmen’s Integration Council (CIC) was

founded to
 monitor the integration
 Co-Chaired by both Eaton and Schrempp
DAIMLER
 CHRYSLER
2 executives -from Chrysler MERGER
 4 executives from Daimler-Benz
 CONTINUED
 Process divided into 12 clusters ( Issue resolution
teams) identifying and realizing the synergies
between the two companies
 The Post merger Integration (PMI) Team supported

DAIMLER - CHRYSLER MERGER

and helped monitor the integration process
 This coordination structure oversaw 80 integration
projects involving hundreds of managers across
the organization

 THE CHALLENGES ASSOCIATED WITH
THE MERGER

•“Merger of Equals” (very few believed it!!)

•
•
•
•Merger for growth (no layoffs, no plant closings and no
scrapping of brands/products)
•
•
DAIMLER - CHRYSLER MERGER
•
•Goal -- “Best implemented merger”
THE RESULTS OF THE MERGER FOR THE
FIRST YEAR
 Sales had risen by 12% i.e. $146.5 billion

 Operating profit had grown by 38% i.e. $9.6 billion

 DCX was the world’s most profitable car company in 1998

 Over 19,000 new employees had been hired

DAIMLER - CHRYSLER MERGER
 Other divisions had achieved record results

 Surprising loses from the new Smart “city-car”

 CONTINUEDD

 The wear and tear on the organization was becoming visible.

▪ Merger activities wasting too much time up to 40%

of top managers' time

▪ Stress increased
Uncertain times is increasing
DAIMLER CHRYSLER MERGER

-
 Improvement needed on the performance of the stock

 Chrysler was lacking appropriate products for the European

market and developing countries
 POST CASE HAPPENINGS

ØChrysler: With the recession of 2000-2002 Chrysler floundered. Schremp fired

Jim Holden, President and CEO of Chrysler and replaced him with Dieter
Zetsche in 2000. DaimlerChrysler stopped disclosing data on synergies.
Ø

Ø2003: Chrysler experiences a huge loss in 2003 ($1.2 bi. In the second quarler).
Questions raised on whether Chrysler should be sold off – concluded that there
were no likely buyers for the whole company
Ø
DAIMLER - CHRYSLER MERGER
Ø2004: Chrysler recovers but Mercedes’ profits fall. Daimler bails out of an
alliance with Mitsubishi. Daimler Chrysler Stock falls to half its value.
Ø

Ø2005: Mercedes loses $1.1 bi in first half of 2005Jurgen Schremp announces

that he will leave at the end of the year. Dieter Zetscheto become CEO. On
Sept 28 announced that he will cut 8500 at Mercedes
Ø
 DCX STOCK

DAIMLER - CHRYSLER MERGER

 DCX STOCK vs. TOYOTA

TOYOTA’S MARKET CAPITALIZATION ($150 bi.) IS MORE

THAN THAT OF GM, FORD AND DAIMLERCHRYSLER COMBINED

DAIMLER - CHRYSLER MERGER

($90 bi.)
Economist Sept 10, 2005
Why the Merger Failed

 FINANCIAL LOSS
 CULTURAL CLASH
 MISMANAGEMENT

DAIMLER - CHRYSLER MERGER




 THANK YOU


"It's no surprise that Schrempp is running


the show. What is surprising is the way in

which he is putting the two organizations
DAIMLER
together: - CHRYSLER
forcing MERGER
head-on confrontations,
with the survivors left to run the
company."
