T h e F a i l u r e o f D a i m l e r - C h r y s l e r M e r g e r
On May 7 1998 the German Daimler-Benz AG and the American Chrysler Companyannounced a ³merger of equals´. Because of the worldwide industry development, culturaldifferences and internal problems on the American side the merger turned out not to be assuccessful as expected.
REASONS FOR MERGER
Both merger and acquisition growth of market share or sales can be realized instantly. Theeconomy of scale in mergers of companies in the same industry is very important. There aresome reasons for Daimler and Chrysler to merge their company.Daimler-Benz deal with the situation because they think most of the automotive companywhich manufactures luxury cars have done mergers or acquisitions in order to expand mar ketshare outside of its market share at the time. Production of luxury cars experiencingovercapacity (saturated market because demand is smaller).On the other side, Chrysler did the merger because Chrysler is a company that havetrendyand fashionable cars, so Chrysler has a chance to succeed in the marketplace and has theobsession to achieve cost effectiveness. Chrysler automotive company is small, so that whenthe American economy declines, Chrysler was affected. Competition in the segment minivansand sport utility vehicles (SUV) which is dominated by Chrysler is becoming increaserapidly, so Chrysler weak, because the competitor is getting higher.Furthermore, the merger is expected to make huge savings by combining purchasing andother operations. It is also aimed to reduce total research and development costs.
DAIMLER SWOT ANALYSIS
Mercedes is one of the strongest global brands and being sold in more than 200countries. Daimler has
technological, engineering and quality strength and regarded as the best engineered cars in luxury cars sector.
Due to small production volume of Mercedes-Benz, suppliers transfer innovations to competing brands. R&D cost-on-turnover was far above the industry averageand basically a German manufacturer has huge factories
Luxury car brands are not independent, except for niche play. DM covereda much broader range than its competitors although it remains as a kind of ³TransportationCompany´. More critical observers mentioned that Daimler used the opportunity. TheMercedes brand boomed. With the Chrysler volume of 3 million units there was the chance of savings in purchasing which would result in net-earnings of Mercedes.