DAIMLER-CHRYSLER MERGER:

A CULTURAL MISMATCH???

“MERGER OF EQUAL”
OR “MARRIAGE MADE IN HEAVEN”

By, Prayash Neupane

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
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.
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.
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.
MERGER MOTIVES

Daimler’s motives Chrysler’s motives

 Access to US market  Access to Europe market

 Reduce cost of production  Avoiding another crisis
 Fear of loosing their competitiveness  Improve R&D department
 Wish to reach more middle class buyers  Overcome the challenge of excess capacity
and overproduction
SUCCESS OF MERGER

 The largest merger, before 1998

 Increasing market power
 Flexible ways of integration of two different countries
 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
SWOT ANALYSIS

Opportunities Threats

 Quality & engineering skills
 Distribution into the key markets
 New distribution of networks
 Does not have corporate brand identity
 Competitors
 Behind in the research & marketing of
hybrid autos
 Cultural differences
AFTER MERGER SHARE PRICE

Price History US:DCX (1/1/1998 - 1/28/2002)

120

100 96

80 78

60

40.8 41.5 42
40

20

0
1998 1999 2000 2001 2002

Price History US:DCX (1/1/1998 - 1/28/2002)

Fig, Daimler-Chrysler’s share prices between 1998 and 2002

 CULTURAL DIFFERENCES

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