Daimler-Chrysler
Daimler Chrysler Merger
What was the stated rationale for the merger?
The potential benefits of the merger were roughly equal both sides of the two companies. First of all Chrysler had a significantly bigger presence in the North American market while Daimler-Benz had a much bigger presence in Europe. Therefore, both companies were eager for more market penetration in the others home-territory. However, the rationale extends far beyond the geographical market presence. At the time of the merger, both companies were profitable but were eager to expand in order to create a long-term orientation and be more competitive with the larger automotive manufactures.
Furthermore, the combined product mix would represent more of a full lineup than each on had separately. For example, Chrysler was more focused on lower cost cars and sport utility vehicles while Mercedes had deep penetration into the luxury market. Additionally, there were a large number of expected synergies that were thought to be gained from a successful merger. Chrysler had much lower research and design costs per vehicle while Daimler-Benz spent nearly five percent of their total operating budget on R&D which amounted to roughly two thousand dollars per vehicle. Chrysler was able to bring a concept to market much faster than its partner and it was thought that its specialty would also help Daimler-Benz throughput times. Each company could also benefit from technology sharing which would result in greater quantities of scale in both research and development as well as in procurement.
Q2. What were the red flags that indicated that this would be a very difficult transaction?
Despite the potential synergies that may have believed to stand the potential to be gained, there...
As a result the merger ended up being called a "fiasco" in many of the headlines from different media sources (Jameison, 2000). Before the merger both companies were profitable, yet after the merger the combined company lost roughly half of its market worth.
Culture was obviously one of the most misrepresented factors among all the various factors that can be responsible for the mergers failure. The employees were from two vastly different countries, with different cultures, different languages, and entirely different way of running their organizations. Furthermore, there were different organizational cultures. While Chrysler was relatively flat with many self-managed team their counterparts at Daimler-Benz were heavily bureaucratic with many layers of hierarchies between the employees and the management.
Basically, the two companies did not much in common at all. Even though the potential synergies seem to make sense on paper, the two companies were not able to create the kinds of relationships that could realize these opportunities. Chrysler was more accepting of different personalities and gave their employees room to operate freely. The on-the-fly leadership style at Chrysler made them both lean and flexible. However, as almost a perfect contrast, at Daimler-Benz the culture was slow and methodological. Their teams made few mistakes and everything was thoroughly tested over and over to ensure reliability. However, at the same time, this created limitations in the time it took to take a design to the market. Nearly any consideration of the different cultures at any level would have indicated that the two companies would face significant barriers to effective integration.
Q3.…
