Daimler-Chrysler Merger

In the merger acquisition scenario across the world, the decision of Daimler and Chrysler to become one entity is a remarkable one and has become one of the largest mergers in the automotive industry. The partners got united in the wedlock with the vision of becoming a world enterprise by the year 2001. The promise of the merger to become a sure global winner is yet to be fulfilled even after one decade of the post merger. The talks for the merger spurted up in the beginning of the year 1998 during an Auto-exhibition conducted by the North-American international Auto show in Detroit.

The deal agreement was put into effect by November 1998 (Levin 1995). Daimler-Benz, famous known as the maker of luxury line of Mercedes-Benz vehicles, was one of the biggest and well known automobile industries of Germany. The Daimler-Benz union came into force following the First World War which led to the merger between Daimler and Benz in 1926 (Tom 2002). Its popularity and reputation as a quality auto maker is impeccable. Its quality engineering skills with production perfection eased the company to come up as a one of the most sought after auto maker the world over (New York Times 2005).

The company’s flagship brand Mercedes, which is one century old, is still popular among the luxury lovers across the world. At the time of merger, it had units in many parts of the world spread as part of fulfillment of its long cherished expansion strategy (Morosini 2004). On the other side, Chrysler, the maker of renowned brands such as Chrysler, Dodge, Plymouth and Jeep, was known mostly as the most efficient auto maker in the world. The operations of the company were confined only to the home market and sales outside the home market were nominal (Glascock 2000).
Exploring the history of the company, it was comprised of a mix of ups and downs and had been close to bankruptcy not less than two times. Realizing this and also that the home operations would not be sufficient enough to sustain in the market and compete with its rivals, the company decided finally to go ahead with the decision to unite itself with Daimler-Benz. The reasons for the significance of the deal between Daimler-Benz and Chrysler are manifold. The first being, it is the biggest deal ever found in the automotive industry.
Moreover, it is the largest merger between two profitable and successful companies. The main motive behind the union of the two successful companies was that after the merger with Daimler-Benz, Chrysler could enjoy the fruits from across the world, particularly in Europe and would be in a position to avail a ready-made wide network of distribution network which otherwise would remain as a dream for the latter. On the other hand, Daimler-Benz on marrying Chrysler could attain a share of not less than 15 percent in the Chrysler’s home market where the former had been facing stiff competition (Hansen 1995).
Furthermore, Daimler-Benz would be befitted by the access to the small car segment trendy designs that its counterpart had enjoyed. As a result of the association between these ‘two equals’, the merger would solve the deficiencies of both by serving each other. The success of any merger rests mainly on the effectiveness of post-merger integration (Marchand 1998). Synergies possible in various areas might just be lying in corners here and there idling away unless tapped properly through effective integration process (Dyer 2001). And DaimlerChrysler seemed to realize this right from the beginning.
The process of integration that DaimlerChrysler adopted was very well planned right from the beginning. Their past experiences with mergers coupled with the obsession for perfection led the German managers go to a great extent to leave anything concerning the merger to chance (Schwab 1996). The first is where one of the partners takes the lead and guides the merged entity towards one vision and set of values. The other being a bottom up approach where a series of task forces involving large number of executives from both the merging companies discuss and resolve key implementation issues in a decentralized way.
One reason for Daimler-Benz to get into the merger was the idea of growing into a global motor company, to borrow Lee Iacocca, the charismatic chairman of Chrysler (during one of its worst phases in history) `s terminology and dream, “Global Motors”, a fully integrated international car builder and seller. That surely seems to be one of the essential factors during this merger. For Chrysler it meant survival, which from its history, Chairman Eaton figured, would be difficult for it to achieve on its own.
While for Daimler-Benz it meant expansion, growth, newer turfs and ready-made addition to the product line besides a well-knit distribution system and an established presence in one of the largest auto motive markets in the world. All this was necessary if Daimler-Benz wanted to be global player and a leader in the new millennium. DaimlerChrysler went a step ahead and adopted an integration strategy that was above the limitations of each as it adopted a hybrid approach that combined both these methods. The board structure would oversee a series of integration task forces but with a centralized co-ordination team.
The company’s integration team was structured as follows. A Management Board consisting of 18 members drawn from both Daimler-Benz and Chrysler. A subset of 8 board members was created as the Chairman’s Integration Council (CIC). A post merger integration structure was put in place in which 12 issue resolution teams were assigned specific areas to proceed with the integration. This team met weekly and debated via the video-conferencing. The merger was regarded as a combination of equals and so the company decided to have co-chairmen in place.
Both Juergen Schrempp and Robert Eaton were to be the co-chairmen and Co-CEOs of the company for a period of three years after which Eaton was to leave the seat to Schrempp and step down. They decided upon a structure, which maintained two headquarters one in Stuttgart, the throne of Daimler-Benz and the other in Auburn Hills, Michigan Chrysler’s headquarters. Furthermore, the merger proceedings were clear about one thing, the maintenance of unique identity of each company’s brands. They decided that it to be an area where nothing would change because of the merger.
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