Mergers and acquisitions in the automobile industry: Daimler Chrysler case study

¶ … mergers and acquisitions have had on the automobile industry over the years. The author examines the benefits of the Daimler/Chrysler merger and how the strategy provided a positive impact on the resulting company. There was one source used to complete this paper.

Throughout the history of business, mergers and acquisitions have been a fact of life. Whether they were conducted through a mutually agreed upon blending, or taken over with hostile measures a merger or acquisition involves two or more companies coming together and becoming one. Mergers provide many positive elements to the final company, but can also presents some difficulties in the way of power struggles, workforce numbers and final production goals.

The automobile industry has depended on mergers for many years to allow the field to accommodate the industry needs. As new designs were needed, market saturations occurred, and financial considerations realized, the use of mergers and acquisitions in the automobile industry has provided positive outcomes.

One such merger, the Daimler/Chrysler blending proved to be a positive step for both companies though it experienced some adjustments along the way. For the most part the merger provided financial power, design abilities and accomplishment of goals for the new blended company.

The reason for mergers in this industry were often industry specific. The automobile industry has grown through many changes over the years. When the industry first began to evolve there were hundreds of automobile companies that were competing for the market customers. Many of them did not have an annual production of more than 1,000 vehicles.

As the industry continued to grow and customers continued to purchase product the need for more designs began to surface. The design and development of an automobile has always been time consuming and expensive. This is one reason that the industry has seen as many mergers as it has. When two companies needed to expand their product line and did not have the funds to handle separate design and development costs for this purpose they would merge together and pool their resources for that purpose.

It provided the ability to constantly reinvent automobiles with better safety gear, more modern designs, ergonomic features and other things that made the consumer want to keep upgrading and trading into new models. This helped the industry stay alive.

Another aspect of the industry that encouraged mergers and acquisitions was the market saturation aspect. As the market became more saturated it became evident that the companies that were smaller would be squeezed out of business. The smaller companies sought out larger companies to merge with to protect their workers and their profits.

The industry hit its peak during the 1970s and since then it has tapered off and at times struggled to stay afloat. Automobiles are currently designed to last longer than ever before and the replacement need has been lowered because of it.

Industry standards continue to improve and environmentalist groups push for stricter and stricter standards when it comes to emissions. All of these factors make it essential to continue to design new models which can be quite expensive.

In 1998 the largest merger in the industry's history occurred. Daimler and Chrysler made the decision to merge their forces together and become one company. When the merger was complete it created the third largest automobile manufacturing company on earth, trailing a bit behind General Motors/Ford. The merger provided a combined workforce of more than 420,000 employees and many billions of dollars.

The merger appeared to be a marriage made in heaven as each side brought to the table strengths where the partner company was weak. Initially there were many happy participants but it was not long before the American participants accused the German participants of not viewing it as a merger so much as a hostile takeover of the American company. These things were eventually worked out and today the merger is considered a success by industry standards.

One of the things that the merged company did to strengthen its final force was to restructure the top management team. Using the best team members from both sides to provide its top management decision making team gave the company an ability to compete worldwide. In addition the fact that the international market opened up as the American market became saturated also helped in the quest of the merger to succeed. Italy, Russia and other nations have recently become the top markets for automobile sales. The fact that this merger included a European country was beneficial to the end desire of the company to reach this new exciting market.

There were many benefits that came with the merger and continued to benefit the two companies along the way. One of the first benefits that occurred was the saving grace it provided Chrysler. Chrysler corporation was in deep financial trouble and was losing ground each quarter. The merger allowed the other company to help keep Chrysler afloat as the industry changed and adapted itself to the longer living models and the market saturation.