Daimler Chrysler:

Post Merger News

Case Analysis

Diksha Mahajan
Nidhi Kumar
Pranati Goswami
Shweta Agarwal
Pallavi Mishra
Varun Dave

Background Information

American automobile
manufacturer
founded in
Chrysler
1925

Garnered the praise as

innovative automaker
after undergoing a
company-wide
restructuring

CEO Bob Eaton believed in

the power of teams

Many of the traditional

vice presidents were
replaced with people who
not only had functional
expertise but who were
able to work together

German automaker, was in

serious financial trouble & It
was Daimler
making noBenz
profit with its
traditional slow bureaucratic
structure

Schrempp took over as

chairman in May 1995 &
business portfolio was
trimmed into 23 strategic
business units to improve
planning and decisionmaking

As part of the restructuring

of the auto business,
Mercedes-Benz was merged
with the Daimler-Benz group

Daimler-Benz still
maintained a strong
centralized corporate staf

The Merger
Daimler-Benz and Chrysler announced
that they would merge to create
DaimlerChrysler
Opportunities were identified to
increase sales, create new markets,
reduce costs, realize economies of
scale for the new entity
Short term synergies of about USD 1.4
billion were seen
Challenge foreseen: To integrate two
dynamic companies into one

Steps taken to Facilitate the

Merger
Formation

of the Dream Team

Two-tiered board system
Supervisory
Board:
responsible
for
appointments and approval of major decisions
Board of Management: responsible for
executing company strategy
However,

integration eforts were marred

by bickering between the Americans and
the Germans

Diferences in management styles, processes,

cultures and working styles caused problems

Restructuring Activities
DaimlerChrysler

claimed to have successfully

completed the merger within 10 months itself
Restructuring activities
Board of Management reduced from 17 to 14
members (Two Chrysler executives removed)
Creation of a separate Sales and Marketing Council
Automotive business broken into 3 distinct brand
divisions
Automotive Council formed to drive innovation and
sharing of knowledge and technologies
The

new structure sort of recreated the old

Chrysler corporation

Problems that occured

No

synergies through platform amalgamation

Industry volumes falling, introduction of fewer
products
Initial increases in numbers were attributed to
merger synergies
However, by 2000, stock prices were on the decline
No more disclosure of information of merger
synergies (received badly by analysts)
Financial problems

Q3FY00 operating loss at USD 512 million

EPS down by 75%, while GMs EPS was up by 22%
Expecting dwindling sales, 7 plants were made idle
Share price hit an all-time low

Other Problems with the Merger

Phase

2 technology sharing eforts

were problematic
Cultural issues were prevalent
By the end of Q1FY01, losses
touched USD 2.7 billion
Cost cutting strategies were
adopted
19,500 employees and 1,000
contractual workers fired in 2001
Non-product spending cut by over 58%

Why post-merger Integration is

Important!
Easy

part of the deal: Negotiations and signing

Putting the deal together and making it work is
the hard part (Integration)
Adequate due diligence of target companies is
of paramount importance
Bringing together two diferent companies from
two diferent countries, different cultures
(corporate and real) is a humungous task
Clear and specific post-merger strategy
should be in place even at the pre-merger stage
Leadership
effectiveness
for
better
integration is a must

Analysis :

What went wrong at Daimler - Chrysler?

Two

once successful companies did not

succeed in combining their strengths
and complementing each others
weaknesses to overcome a crisis
together.
The merger failed because :
Diferences in cultures and values
Mismanagement and Lack of coordination
Severe lack of trust among the employees
Leadership style and poorly integrated
management structure

Thank
You