Daimler chrysler merger

1. A Marriage Made in Hell

2. Merger
• Result of an agreement between two companies
to join their operations together.
• Some key issues in mergers follow.
Communication: Power and Culture: Operations:
Grapevine conflict: Cultural fit. Processes
win-win situation.

3. Studies of M & A integration report 60-75% fail (Source: KPMG, 2008)
Cultural and human resource issues are at least equal in importance to financial
factors in making a deal work (The Conference Board, 2001)
E.g., 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)

4. • Founded in the year 1886 by Gottlieb Daimler and Carl Benz.
• 125 years later, in anniversary year 2011, Daimler AG is one of
the world’s most successful automotive companies.
• With its divisions Mercedes-Benz Cars, Daimler
Trucks, Mercedes-Benz Vans, Daimler Buses
and Daimler Financial Services.
• The Daimler Group is one of the biggest
producers of premium cars and the world’s
biggest manufacturer of commercial vehicles
with a global reach.
• Daimler Financial Services provides its
customers with a full range of automotive
financial services including financing, leasing,
insurance and fleet management.

5. • With the resources, technology and worldwide distribution network
required to compete on a global scale, the alliance builds on Chrysler
Group‟s culture of innovation, first established by Walter P. Chrysler in
1925, and Fiat‟s complementary technology that dates back to its
founding in 1899.
• Chrysler Group produces Chrysler, Jeep, Dodge, Ram, SRT, Fiat and
Mopar. • Chrysler Group‟s product lineup
features some of the world's most
recognizable vehicles, including the
Chrysler 300, Jeep Wrangler, Dodge
Challenger and Ram 1500.
• Fiat contributes world-class
technology, platforms and
powertrains for small- and medium-
size cars, allowing Chrysler Group to
offer an expanded product line
including environmentally friendly
vehicles.

6. • On Nov. 12, 1998, Co.
completed a business
combination agreement with
Chrysler Corporation.
• The $75 billion industrial merger
creates Daimler-Chrysler AG, an
international transportation and
services company that ranks as
the world's third largest
automobile company based on
1997 revenues.
• The enterprise will have
operational headquarters in
Stuttgart (Germany) and Auburn
Hills, MI (USA).
• “The Deal of the Century”
Automotive Industries, June
1998

7. The Merger Was Welcomed by Auto
Analysts and Consumers
The world’s third largest auto
manufacturer (GM 1st, Ford 2nd)
Over $154 billion revenue, over $5.6
profit.
Mercedes-Benz ranked as the most
visible luxury brand.
Chrysler’s success in low-end/sub-
compact cars and trucks .

8. Daimler-Benz
• Mercedes is the most popular luxury brand
• A strong dealer network
• Ranked #17 globally
Chrysler Corporation
• Low-end/sub-compact cars and trucks
• Big auto manufacturer in North America
• Mini-vans, Jeep and Dodge trucks
• Ranked #25 globally

9. • 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 costs

10. Marriages Not Always Made in
Heaven

11. • Daimler
Management processes of
planning, organizing and
controlling. More conservative,
efficient and safe.
• Chrysler
Setting goals, directing and
monitoring implementation.
Known as the risk-taking
underdog
● Cultural challenges
▬ Differences in working styles, leadership
approach
▬ National culture differences
▬ Behavioural differences

12. • Daimler
The driving image and
experience associated with
the highest quality available
in the market
• Chrysler
Attractive, eye-catching
design at a very competitive
price

13. • Daimler
Emphasis on
engineering, design,
quality and after
sales service
• Chrysler
High volume, low cost
manufacturing and
distribution

14. ▬ Key members of
management team
leaving
▬ Employee moral and
motivation
▬ Retention of key staff
▬ Consultation with staff
and representative
bodies

15. Others issues
● Daimler controlling 57%, in what was perceived to be a „merger of
equals‟.
Though strategically, the merger made good business sense. But
contrasting cultures and management styles hindered the realization
of the synergies.
● Daimler-Benz attempted to run Chrysler USA operations in the same
way as it would run its German operations.
● Daimler-Benz was characterized by methodical decision-making. On
the other hand, the US based Chrysler encouraged creativity.
● While Chrysler represented American adaptability and valued
efficiency and equal empowerment Daimler-Benz valued a more
traditional respect for hierarchy and centralized decision-making.
● Three years later DaimlerChrysler's market capitalization stood at
$44 billion, roughly equal to the value of Daimler-Benz before the
merger13. Chrysler Group's share value has declined by one-third
relative to pre-merger values.

16. Importance of company culture integration.
Importance of a clear and correct target.
Importance of customers and demands.
Importance of the association between theories and
practice
Importance of corporation especially the top
executives
Importance of knowing the market and the partner

17. ● Compelling business reasons need to drive mergers and acquisitions
● People‟s concerns matter, addressing them is as important as other factors
in M & A activity
● Meaningful involvement in the execution of the change has the most impact
on employee cooperation and commitment
● Continually clarify direction, and communicate extensively, candidly, and on
ongoing basis
● Treat people fairly, and design systems and processes that can flex with the
needs of the organization
● OB practitioners have a clear role in guiding and supporting change
processes and change leaders in M & A activities
These pitfalls of mergers and acquisitions challenge today's leaders to a new
standard of managing change. The strategy is clear - accelerate, concentrate,
adapt, and in the case of international M&As, consider cultural differences. The
human and cultural issues that separate the 17% from the 83% are not about
some abstract values or the "soft stuff", but the concrete reality of productivity,
economic value and sustained growth.

18. http://oica.net/category/production-statistics/
“Organisation Internationale des Constructeurs d’Automobiles” (OICA).
Date Source: KPMG