Daimler Chrysler merger: A cultural mismatch??? Case Study Presentation

1. DAIMLER-CHRYSLER MERGER:
A CULTURAL MISMATCH???
By, Prayash Neupane
“MERGER OF EQUAL”
OR “MARRIAGE MADE IN
HEAVEN”

2. WHAT’S IN THIS PRESENTATION ???
 Introduction ( History of both companies)
 Merger Process
 Merger motives
 Success and failure
 Cultural differences
 Analysis after merger
 Conclusion
 My Opinion on merger

3. DAIMLER-BENZ (1926-98)
 In 1885, Daimler together with Maybach began work on the first
engines that were designed specifically for use in motor vehicles.
 This German firm, initially operating at Cannstatt near Stuttgart,
was the origin of the business variously known as Daimler Motoren
Gesellschaft from 1890 to 1926, and then Daimler-Benz from 1926
to 1998.
 Daimler Benz was founded in 1926. An Agreement of Mutual
Interest - was signed on 1 May 1924 between Karl Benzs Benz &
Cie., and Daimler Motoren Gesellschaft.

4. CHRYSLER CORPORATION (1925-98)
 The company was founded by Walter Chrysler (1875–1940) on
June 6, 1925.
 The Chrysler was a 6-cylinder automobile, designed to provide
customers with an advanced, well-engineered car, but at a
more affordable price than they might expect.
 The advanced engineering and testing that went into Chrysler
Corporation cars helped to push the company to the second-
place position in U.S. sales by 1936.

5. MERGER PROCESS
 In May, 1998, Daimler-Benz and Chrysler Corporation, two of the
worlds leading car manufacturers, agreed to combine their
businesses in what they claimed to be a ―merger of equals.
 The process began when Jurgen Schrempp and Robert Eaton met
to discuss the possible merger on January 18, 1998.
 The merger was completed on November 12, 1998.
 The merger resulted in a large automobile company, ranked third in
the world in terms of revenues, market capitalization and earnings,
and fifth in the number of units sold.
 German and American styles of management differed sharply.
 To minimize this clash of cultures, Schrempp decided to allow both
groups to maintain their existing cultures.

6. MERGER MOTIVES
Daimler’s motives
 Access to US market
 Reduce cost of production
 Fear of loosing their competitiveness
 Wish to reach more middle class
buyers
Chrysler’s motives
 Access to Europe market
 Avoiding another crisis
 Improve R&D department
 Overcome the challenge of excess
capacity and overproduction

7. SUCCESS OF MERGER
 The largest merger, before 1998
 Increasing market power
 Flexible ways of integration of two different countries

8. SWOT ANALYSIS
Strength
 Merger/ combined two strong
companies.
 A leader of motivation
 Strong existing product brand
 Record revenue & increasing
market share
Weakness
 Combined two different culture
 Employee have been leaving at
high rate
 Harder to inspire vision

9. SWOT ANALYSIS
Opportunities
 Quality & engineering skills
 Distribution into the key markets
 New distribution of networks
Threats
 Does not have corporate brand
identity
 Competitors
 Behind in the research & marketing
of hybrid autos
 Cultural differences

10. AFTER MERGER SHARE PRICE
96
78
40.8 41.5 42
0
20
40
60
80
100
120
1998 1999 2000 2001 2002
Price History US:DCX (1/1/1998 - 1/28/2002)
Price History US:DCX (1/1/1998 - 1/28/2002)
Fig, Daimler-Chrysler’s share prices between 1998 and 2002

11. CULTURAL DIFFERENCES
Daimler-Benz
 Hierarchical structure
 Management process of planning,
organizing & controlling. More
conservative, efficient & safe
 The driving image & experience
associated with highest quality
available in market
 Emphasis on engineering, design,
quality and after sales service
Chrysler
 Team-oriented structure
 Setting goals, directing &
monitoring implementation.
known as risk taking underdogs.
(Daring, diverse & creating)
 Attractive eye-catching design
at very competitive price
 High volume, low cost
manufacturing & distribution
1) Corporate
Structure
2) Corporate
Culture
3) Customer
Proposition
4) Value Chain

12. CONCLUSION
 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)
 A successful merger would required the two companies to
abandon their own business culture and create a new distinct
one. ( Thomus Stallkamp Former president of Chrysler)
 Usally, it is extermly difficult to pin point exactly what role culture
played in a success or failure. However in the case of Daimler-
Chrysler, it would be a safe assumption to say that cultural factor
was among the crucial factor which determine the downfall of
company.

13. MY OPINION TO SOLVE THE PROBLEM
 Should have identified vast cultural differences in the corporate
culture of both companies.
 The leaders of both Daimler-Chrysler should have exhibit cultural
sensitivity and emotional intelligence to facilitate the growth of
cohesive culture thorough the collaboration of shared meaning
and values.

14. ANY QUESTIONS ???