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THE PRECEDENT
Two of the worlds leading car manufacturers, Daimler-Benz AG of Germany and the US-based Chrysler Corporation announced the largest industrial merger in history on September 18, 1998. The new organization, called Daimler-Chrysler, became the worlds fifth-largest car maker, ranked after GM, Ford, Toyota and Volkswagen, with combined revenues of around $130 billion and a combined operating profit of around $7 million (all figures in US dollars).
In the period leading up to the merger, both firms were performing well. Chrysler was at that time the most profitable American automaker. Stakeholders in both organizations expected that after the merger the new company would allow them to benefit from each other’s competencies as equal partners. Daimler’s strength lay in luxury and high-end cars, and Chrysler’s in sport-utility vehicles and minivans; Daimler’s core market was in Europe, Chrysler’s in North America; Daimler had an outstanding reputation for engineering complements and Chrysler for product development. Chrysler would obviously benefit from association with the Mercedes-Benz brand and Daimler would benefit from Chrysler’s engineering and marketing. ...
Chrysler expected benefits of $1. ... Shareholders supported the merger with a keen sense of optimism and their respective stock prices rose to reflect this mood. It was expected that both entities would operate in the same way that they had prior to the merger and retain most of their own management and strategic business unit teams.
Performance after the merger, however, was entirely different from what was expected, particularly at the Chrysler division. Recently, Daimler-Chrysler’s stock price has fallen to about $30, from over $100 immediately after the merger. ... Cultural differences and ensuing conflict were considered the main reason for failure to realize the synergies identified prior to the merger. As a result of these discrepancies and the German division’s increasing dominance, performance and employee satisfaction at Chrysler plummeted quickly. Following the merger, Chrysler started losing money and market share and has continued on this course until present. In fact, Daimler-Chrysler announced recently that the Chrysler division is not expected to generate profits before 2003.
Aggravating the situation, most top Chrysler executives and many key engineers left the company as a result of power struggles. Daimler-Chrysler is now operated almost exclusively by the German unit, which is increasingly dissatisfied with the performance of its US-based Chrysler division, which is now facing additional layoffs. Employees at Chrysler widely believe that Daimler had intended to take over the entire organization and impose their culture and work style even before tangible pre-merger talks were initiated. These criticisms point blame at Jürgen Schrempp, CEO of Daimler prior to the merger and now CEO of the merged company, for having lied to Chrysler. But examination of developments between Daimler and Chrysler pre- and post-merger illustrates the numerous pitfalls of cross-border transactions and the reasons for their failure. ... This is supported by a recent Chief Executive Magazine study that found cultural difference to be the blame for 85% of merger failures studied. ... In the case of Daimler-Chrysler, the perceived benefits of the merger were mitigated by the failure to account for difference in culture. ... the USA
In the case of the Daimler-Chrysler Merger there were a number of national and firm-specific cultural issues and differences. ... Chrysler may have been typical of US firms that favor decentralization, informality and are associated with a corporate culture high in individual commitment and collective inovation. At Chrysler, each individual was encouraged to contribute to the firm’s value drivers. ... AND STRODBECK FOR EXAMPLE – WOULD HELP YOUR ANALYSIS HERE
The emphasis on informal practices in the US over formal channels in Germany develops the culture debate surrounding the Daimler-Chrysler merger, and identifies a critical divergence in corporate culture. ... I THOUGHT COOPERATION AND COLLABORATION WERE SIMILAR
Impediments to cross-cultural success in the Daimler-Chrysler merger consisted of individuals or groups on both sides that defended older structures and norms for reasons of familiarity and normalcy .
Approximate Word count = 3351
Approximate Pages = 13.4
(250 words per page double spaced)
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