Daimler-Chrysler- Case Study Corporate Marriages Have Become Case Study

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Daimler-Chrysler- Case Study

Corporate marriages have become so problematic in recent times that it no longer generates a shocking response from the analysts at Wall Street if a merger fails. We witnessed some of the classic merger downfalls in 1990s when many large companies decided to merge their businesses mainly because of poor economic conditions. Because of these failures and the many stories surrounding rapid collapse of corporate marriages, the public along with Wall Street analysts more or less has stopped reacting to such news. Still, the news that Daimler-Chrysler merger was facing deep problems generated a massive response from Wall Street observers who were keenly anticipating some positive news. Everyone had believed that it was a 'merger of the equals' since both companies ranked very high in their respective areas of expertise.

Things should have worked out well because there were apparent no clash of interests. Daimler Benz was basically a well-known producer of luxury cars and Chrysler was a truck company that excelled in minivans and sport utilities. On the surface everything looked smooth. The $40 billion merger was to create the third largest automobile company in the world after GM and Ford. This was in itself a huge achievement for the two firms that couldn't hope to beat the market leaders on their own. CEOs of the two companies Jurgen Schrempp of Daimler-Benz and Eaton of Chrysler knew their firms had much to gain from the merger. The conditions in the industry had not been encouraging in the past few years and demand was sluggish. Secondly with the merger, both companies could easily gain access to both European and Americans markets.

In short, "prospects for the merger looked good. Because of the two companies' complementary product ranges, regional concentrations, and capabilities, its logic was acclaimed by both investors and auto industry analysts.

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The extent of the companies' pre-merger and post-merger planning by the two companies was also unusual. Under the vision of "one company, one vision, one chairman, two cultures," the merged company established an elaborate structure of joint Chrysler-Daimler integration teams which began work on reconciling and integrating almost every aspect of the two companies development, technology, operations, and marketing with a view to achieving the $3 billion in cost savings that the merger anticipated."

The great Daimler-Chrysler however ran into problems within the very first year of their merger when many senior executives of Chrysler left the firm and there were widespread rumors of internal clashes. And the fact that Chrysler was hit the hardest left many analysts wondering if it was actually a merger of equals. Within a year, Chrysler profits and Daimler-Chrysler's share prices dropped significantly and problems arising from the merger became obvious. Not only the senior executives of Chrysler had left, every other aspect of the post-merger period proved that Chrysler was literally being ruled by Daimler and it was not a merger but rather an acquisition. It is important therefore to analyze the problems in order to reach the root cause of post merger troubles at Daimler-Chrysler.

The biggest problem that arises when two large corporations marry is the clash of cultures. With distinctive internal cultures, the two firms are bound to run into management related problems, as management and employees are usually unfamiliar with the way the other firm conducts business. Management strategies differ significantly and this causes a wide gap to emerge between objectives, goals and vision of the two firms. These problems compounded at Daimler-Chrysler because of general differences in German and American approach to various strategic problems.

While Germans are obsessed with planning, Americans are risk-takers. When they saw an opportunity, management at Chrysler….....

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