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Daimler-ChryslerA Match made in Heaven goes through HELL!!
About Daimler-Benz
Europe’s Largest Industrial Company
Employs 300,000 people
Operations in Passenger Cars
Commercial Vehicles
Aerospace
Services
Directly Managed Businesses (Rail, Automotive Electronics and Diesel Engines)
About Chrysler
US Based Company
Operations in Cars
Minivans
Sport-utility vehicles
Trucks
“We produce cars and trucks that people will want to buy, will enjoy driving and will want to buy again”
Why the Merger?
For Chrysler- Merger or Perish
For Daimler-Benz- The Perfect Storm
Daimler not able to take advantage of the booming US Economy
High costs for Daimler
Create a much larger globally based enterprise to compete in major markets of the world
The Deal
Announced-6th of May 1998
Merger of Equals
Market Cap -US $92 Billion
Stock-swap Deal 57%
43%
Total Shareholding-Daimler Chrysler
Daimler Benz
Chrysler
Highlights of the Deal
Merger of Equals Largest Industrial Merger
ever Horizontal Merger DaimlerChrysler- World
Leader in Transportation Fifth Largest Company World class products and
brands complement each other
No plant closures or lay-offs planned
Synergies
World Leader in Transportation
Revenue Enhancement
Minimum overlap in Markets and Customers
Complete Spectrum of Products
Lower Costs and Higher Productivity
Cheaper Labor
Exchange of Technology
Higher Bargaining Power
Why did the Merger Fail?
Diametrically 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
Mismanagement Galore!
"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”
- Juergen Schrempp
(DaimlerChrysler CEO )
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
Cultural Differences
The merger can be described as a “marrying up/marrying down” phenomenon
Employee bias was rampant in the merged organization
Chrysler’s market share in Europe, before and after merger – 2% !!
Chrysler and Daimler-Benz's brand images were founded upon diametrically opposite premises
Brand bias added to the woes of the company
More problems
Daimler relied heavily on quality and Chrysler inclined towards being cost-effective
Allegations of “fraud and deceit” on former Daimler executives
Adding fuel to the fire was the closing out of Chrysler’s Plymouth brand
Time to Call it off
Falling share price – Easy target for PE firms
Falling sales and huge losses owing to volatile US auto industry
Synergies not working out to be as expected
Chrysler hell bent on producing “big” cars
DaimlerChrysler’s market cap in the recent years was almost equal to what Daimler’s was before the merger !!
•In August 2007 the deal was finally called off•Chrysler was sold to Cerberus Capital Management•Daimler AG received $8.9 billion from the PE group•Cerberus got 80.1% stake in Chrysler•Daimler also paid $810 million for debt repayment of DaimlerChrysler
Time to Call it off contd…
Rohit Gadia
Saurabh Chube
Sunitha Sureshbabu
Viraj Parekh
Thank You
Compiled by Students of SP Jain Center of Management – Singapore / Dubai, data from secondary sources only.