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Chrysler Corporation and Daimler Benz Merger The 1999 merger of Chrysler Corporation and Daimler Benz signified the appearance of a truly global corporation. A central question in any merger ultimately concerns effectiveness. An effective merger allows the combined organization to achieve synergy and enhanced productivity relatively quickly, with minimum stress and uncertainty for the organizational participants. In contrast, ineffective mergers may result in long term loss of productivity through alienation of employees and other key stakeholders, turnover of valuable employees, layoffs and lost jobs, and high levels of stress and uncertainty for those who remain.
While a number of pre-merger variables such as the relative health of the individual companies, and the degree of fit influence effectiveness, the strategies of merger, including the surrounding discourse, must also be considered. The two organizations that came together to form DaimlerChrysler AG had very different national origins and identities, histories, corporate cultures, products and markets. Daimler Benz is considered the archetype of German engineering excellence and industry leadership. Its flagship product, Mercedes, has long been the leader in the luxury car market. The company, however, has not only been associated with innovations in product engineering, quality, and design, but with the production of military equipment for Nazi Germany during World War II. Daimler Benz, at the time of the merger, was largely bureaucratic and somewhat rigid in its structures, proud of its industry leadership, and highly diversified into heavy manufacturing and aerospace.
The company was already highly globalized with operations throughout Europe, South America and parts of India. Its presence in the United States was limited, however. The Chrysler Corporation also had a long and prominent history. Founded by the entrepreneur Walter P. Chrysler in the 1920 's, the company had also enjoyed engineering success and market leadership. The company had been the smallest of the "Big Three" however, and had suffered badly from market downturns and industry cycles.
The most notable such event was the near bankruptcy of the early 1980 's where the company was kept alive through government loans and the charismatic leadership of its CEO, Lee Iacocca. Iacocca had strategically linked Chrysler to American values of patriotism and competitiveness in order to build support for the company (Seeger, 1994). Chrysler had emerged from these troubles as a dynamic and tough competitor with a culture steeped in American innovation, creativity and pragmatism (Moritz & Seaman, 1984). On the popularity of its Jeep and Mini Van car lines, it rose to record levels of profitability in the late 1980 and 1990 's. The company had little success, however, building a presence outside the US.
The Detroit news media leaked the news of the potential Daimler Benz-Chrysler merger on May 5 1998. At the time, Chrysler was in a strong position with robust North American sales and the beginnings of an international presence. On May 6, the Chrysler Corporation issued a press statement confirming they were "engaged in discussions about a possible business combination of the two companies involving a stock transaction in which both companies would become stockholders of a new company" (Chrysler Corporation, May 6, 1998). By May 7, the merger was confirmed and a hailstorm of speculation followed. It was announced in London that the new company would be called DaimlerChrysler (DCX) and incorporated in Germany and not in the USA. In a foreshadowing of other discourse, the initial statements to the press mentioned "world class products and brands that complement each other" and a "perfect fit of two market leaders for further global growth" (Chrysler Corporation, May 7, 1998).
The reason given for the merger was that the two companies were a perfect fit of two leaders in their respective auto markets of Europe and North America. Jurgen Schrempp, Daimler Benz CEO, stated that both companies had dedicated and skilled work forces and successful products, but are in different global markets. In merging, the hope was to combine these factors building on each other's strengths. One of the keys to this success, he suggested, was the common corporate culture and mission the companies shared. It was on this day that the first of the financial details was announced. Rather than 50 - 50 exchange of stock for Chrysler stockholders, the exchange ratio was set a. 547 DCX stock for each share of Chrysler (Chrysler Corporation, May 7, 1998).
Because of laws in both the US and Germany governing mergers, Chrysler and Mercedes Benz announced that they would not be issuing any further press statements regarding the merger. This quiet time would allow both companies to protect future interests and allow them to file the necessary documents with both the US Securities and Exchange Commission and its German counterpart. From this point until November 17, the official day set for the merger, public communication on the merger was highly controlled and limited. Confirmation of merger at the two companies's tock holders meetings, however, did occur and in late June an announcement of board members was made. In late September, a special stockholders meeting confirmed the merger with 97. 5 % voting in favor. At about the same time Tom Stallkamp, Chrysler President, announced the formation of a Post Merger Integration Team that would be responsible for the monitoring of the two organizations.
They would deal with all aspects from product to communication once the merger had taken place. Critical audiences for the Chrysler/Daimler Benz merger included shareholders, employees, both management and line workers, dealers and customers. Chrysler had a history of very positive and open relations with key stakeholders as part of the legacy from its near bankruptcy in the 1980 s. Key stakeholders, such as unions and banks, had required relatively high levels of transparency in return for their support of the 1980 's Chrysler bailout package. For a time, Douglas Fraser, president of the United Auto Workers, had a seat on the Chrysler board, something unheard of in the American auto industry.
Customers also had a particularly close relationship with the company. Many had bought Chrysler products specifically to help the company survive and had become loyal repeat customers for Chrysler's profitable Minivans and Jeeps (Seeger, 1994). The DaimlerChrysler merger was initially framed as a change that would benefit the company and maximize shareholder value. Such justifications are typical with mergers.
The justification in this instance was immediately compounded by two additional factors. First, the fact that the merged corporation would be German precluded the new stock, DCX, from inclusion in the US Dow Jones stock listing. Therefore, many major mutual funds that buy based on the Dow automatically excluded DCX stock, pushing down share prices. Second, some members of the American Jewish community, who had often favored Chrysler stock over Ford and GM based on the latter's histories, expressed serious reservations about the merged corporation. Daimler Benz had played a prominent role in World War II and many members of the Jewish community were uncomfortable in investing in the firm. Employees.
To examine actual performance of the new global DaimlerChrysler three normal business criteria have been selected: sales, operating profits and stock value. Chrysler sales during the months leading up to the merger had set record levels. For October 1998 (the last full month of sales), Chrysler reported a record month of 226, 179 vehicles, a 20 percent increase over the prior year. This amounted to 16. 1 percent share of the American Automobile Industry. The following October, sales for the month were at 209, 517 vehicles, down 4 percent to the prior year. Market share, was down to 15. 0 percent.
Two years after the merger announcement, May 2000 sales were disappointing, down to 226, 348 units and market share had declined to 13. 6 percent. These sales trends have occurred during what has been, until recently, a very strong industry-wide expansion. Precipitous sales declines have continued into 2001, prompting the wide spread feeling that this new global company is in decline. In January 2001, DaimlerChrysler announced a major restructuring including cutting 26, 000 jobs in the Chrysler group. By the time the merger took place (November, 1998) Chrysler's stock was exchanged at. 6235 shares of the new company.
The first day of stock trading was November 17, 1998. The initial value of the stock was $ 70 per share. By January 1999 it had risen to over $ 100 per share. By late January, in spite of continued good sales, it began to fall, a trend which has continued over the last eighteen months, as of June 1, 2000 it was at a record low of $ 53 (15 / 16). This represents a loss of almost a third of the original value.
Profits showed a slight decline in the first year. Initial 2000 1 st quarter results are somewhat better than anticipated, however this has done little to keep the stock value up. Despite a number of cost cutting efforts, the stock value has generally failed to perform according to the expectations outlined in the merger. By early 2001, DCX was trading around $ 48. One of the first changes to occur after the merger concerns the structure of the old Chrysler PR department. Rather than handle issues on a local basis, all communication post-merger had to be cleared through Stuttgart, Germany.
This created a strain that soon resulted in a number of high level managers leaving the company, including those who had been instrumental in developing the merger communication plan. It can be argued that in any such merger, people will leave or be replaced, but this loss reduced the ability of the company to manage discourse in a focused and coherent way. In the months since the merger, synergistic operations and the creation of an integrated "single global entity" have largely stalled. Moreover, the notion of a "single global entity" is increasingly seen as inconsistent with the goal of maintaining a distinct Chrysler identity implied by the "marriage of equals" discourse.
The announcement of 26, 000 in job cuts on January 29, 2001 has shocked employees, suppliers and dealers. The meaning of the global merger continues to intersect jarringly with the meaning of the domestic Chrysler Corporation. While at the time of the announcement the overall strategy was to "become one" this goal now appears to have changed. Rather than integrating Chrysler at all levels, the strategy is now to partition the old organization into a separate "Chrysler group." The losses at the Chrysler group have suggested to some that the merger was a serious mistake. The very recent yet inevitable market downturn of a cyclical industry means less profitability and in light of the general confusion of the meaning of the merger has allowed many stakeholders to question Daimler Benz's very viability as a global concern. Stock values, expected to rise in light of the merger have fallen sharply creating serious discontent among the critical shareholder audience.
Some of this can be attributed to the losses of the Euro versus the US Dollar. It is also clear that stock value declines are due largely to DaimlerChrysler no longer being included in the Dow Jones Industrial Average, and its exclusions for the listing of the top ten US companies. The number of DaimlerChrysler shares traded on a daily basis is now less the a million while GM and Ford shares traded daily continue to average in the millions. Increasingly however, incompatibility in terms of culture belied "good fit"Marriage of equals" created expectations that Chrysler would continue as an equal partner, while "single global entity" suggested loss of identity to create the requisite integration and synergy. The construction of global organizations through merger and acquisition is a trend that is likely to continue. When such mergers occur, the meaning of the individual constituent organizations, often grounded in unique cultural and historical experiences, must be reconciled through divergence, convergence or some combination of the two.
In fact, both Chrysler and Daimler executives portrayed the merger in glowing terms, emphasizing the potential positives and entirely ignoring any potential problems. This allowed important issues to go unaddressed. The meaning of the DaimlerChrysler merger, therefore, has not yet been defined in a coherent way. The company, designed to be a global leader in the industry, is at the moment a confusion of American and German values and identities. This suggests that global mergers must be approached cautiously and that the symbolic aspects of these events must be examined with great care. References Corporate Image Document. (June 1998) DaimlerChrysler Corporation, Auburn Hills, MI.
Eaton, B. (1998). Email from Bob Eaton (Internal). DaimlerChrysler, Auburn Hills, MI Moritz, M. , & Seaman, B. (1984). Going for broke.
Garden City, NY: Double Day. Seeger, M. W. (1996). "Technological transfer and multinational corporations in the Union Carbide-Bhopal India Crisis, " In J. Java & M.
Pritchard (Eds. ). Responsible Communication (pp. 245 - 265). Cresskill, NJ: Hampton. Seeger, M.
W. (1994). I Gotta Tell You: Speeches of Lee Iacocca. Detroit: Wayne State University Press Fitzgibbon, Jane E. , DaimlerChrysler: The Story of the Merger, London England, July 2000.
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Research essay sample on Chrysler Corporation And Daimler Benz Merger
