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Daniyar Meiremgaliyev SP20906 Shahab Ravanparast SP20689 Ng Jing Xing (Jason) SP20952 Yap Chiou Wen (Thomas) SP20996 Yadgar Taha SB20876 Harvir Singh SB21008

Daimler-Chrysler case study

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A presentation on how the M&A can fail.

Text of Daimler-Chrysler case study

Page 1: Daimler-Chrysler case study

Daniyar Meiremgaliyev SP20906Shahab Ravanparast SP20689Ng Jing Xing (Jason) SP20952Yap Chiou Wen (Thomas) SP20996Yadgar Taha SB20876Harvir Singh SB21008

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Agenda•Industry•Company backgrounds•Motives of merger and acquisition•Success and failures of the merger•Cultural Problems•Analysis of post-merger•Conclusion

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Gottlieb Daimler, 1834-19001889 – Developed engines with Wilhelm Maybach1891 – Fredrick Simms Bought UK patent rights to Daimler’s engine1893 – Formed a company called ‘The Daimler Motor Syndicate Ltd.’1924 – Merged with Karl Benz’s Benz & Cie to form Daimler-Benz. Built cars under the name Mercedes-Benz.

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Gottlieb Daimler, 1834-19001889 – Developed engines with Wilhelm Maybach1891 – Fredrick Simms Bought UK patent rights to Daimler’s engine1893 – Formed a company called ‘The Daimler Motor Syndicate Ltd.’1924 – Merged with Karl Benz’s Benz & Cie to form Daimler-Benz. Built cars under the name Mercedes-Benz.

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Porter’s 5 Model

Figure 1. Porter’s 5 model, conducted to DC merger

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Figure 2. Porter’s 5 model, conducted to DC merger

January 12, 1998 Schrempp and Eaton met to discuss the possible merger

May 6, 1998 Merger agreement was signed in London

May 7, 1998 Merger agreement made public. Surprised the business community, including the employees of Daimler Benz and Chrysler. Only 20 -30 managers were in the “loop”

May 14, 1998 Daimler-Benz Supervisory Board OKs the merger

July 23, 1998 European Commission approved the merger

July 31, 1998 Federal Trade Commission approved the merger

August 6, 1998 DaimlerChrysler announced that their shares would trade as “global stock” instead of ADRs

September 18, 1998 97% of Chrysler shareholders and 80% of Daimler-Benz shareholders approved the merger

November 12, 1998 Merger completed

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Reasons for mergers and acquisition:

Daimler-Benz’s motives: Access to U.S market Reduce cost of production Fear of loosing their competitive

Chrysler’s motives: Avoiding another crisis Improve R&D department Access to Europe market

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Successes of DaimlerChrysler• The largest Industrial Merger, Before 1998

• Increasing market Power

• Flexible Ways of Integration over two different countries

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SWOT analysis of DaimlerChryslerStrengths•Merger Combined two strong Companies•A leader of innovation•Strong Existing Products Brands•Record Revenue and Increasing Market SharesWeaknesses •Combined two different Cultures•Employees have been leaving at a high rate•Harder to inspire Vision

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Opportunities•Quality and engineering Skills•Distributions into key markets•New distributions of networks

Threats•Does not have corporate brand identity•Competitors•Behind in the research and marketing of hybrid autos.

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Opposite management thinking•Millions spent on post-merger cultural sensitivity workshops•Rifts in business practice remained intact•Workshops didn’t help in changing management sentiment •Authoritative Germans vs. Creative Americans•German replaces an American as Chrysler’s president

DaimlerChrysler Failures

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"The Merger of Equals statement was necessary in order to earn the support of Chrysler's workers and the American public, but it was never reality”


(DaimlerChrysler CEO )

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Lack of governance

•Juergen Schrempp and Bob Eaton did not follow coordinated course of action during transition phase•Low level contact between the two top level management guys•The American dynamism faded under subtle German pressure•Chrysler started drifting into no man’s land•It bled cash for almost an year, owing to mismanagement

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Daimler-Benz’s CultureDaimler saw itself as the foremost innovator of the automobile industry with a rich engineering and quality heritage (see Figure 3).

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Chrysler’s CultureChrysler was a trendsetter for new designs, short development times referring to its organizational flexibility and a sense for market opportunities (see Figure 4)Figure 2: Chrysler’s Cultural Web

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The comparison of culturesThe major differences, that we have elaborated comparing these two companies are in the below table 1.

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Inability to Manage Cross-Culturally

•A potential issue that should not have been ignored was the strong

cultures and language barriers between the U.S. and Germany

•American business practices are very informal.

•In Germany they employ a rigid hierarchical corporate structure.

•Perceived benefits were never realized due to a lack of coordination, and

inability to manage across the two cultures with a central authority

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Attempt to pick a middle spot

The Germans and the Americans had been out of sync from the start

Resistance to work together

DaimlerChrysler de-merger


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Daimler’s Strategic Position•Focus on original strategic position


Note : Sales increased by 12%•Mercedes C class sold successfully•Good strategic position after demerger

2006 2007 20080






Net Profit For MercerdesEu

ro B



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Was the Chrysler demerger inevitable? DaimlerChrysler’s view•Chrysler loss US$ 1.8 billion in 2nd 2000 and will loss US$2 billion in 2001• Up-front costs for new models and offer discount to clear stocks.•Chrysler loss half Daimler Chrysler Group net profit for 2001.•Chrysler had loss of Euro 1 billion in 2003 •Takeover bid

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Chrysler’s view•Chrysler’s engineering functions. •The key for surviving

-develop a new range of mid-size sedans, develop hybrid and electric vehicles. •Lacks resources and capabilities to operate as an independent company• Now rebuild the company.•Cut cost and return to profitability quickly

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Mercedes Marketing Strategy

Safety, Luxury, & Precision Engineering

Life Style Oriented Fun Loving

Approachable Energetic

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Mercedes Future Strategy

Blind spot detectionLane Keeping Assistance Night View

Attention AssistanceMonitor Road Assistance

Mercedes Benz S400 hybridFeatures

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Our recommendations

``a successful merger would require the two companies to abandon their own business cultures and create a new distinct one.”

Thomas Stallkamp Former President of Chrysler

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