Daimler-Chrysler Merger: A Cultural Mismatch?


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Case Details:

Case Code : BSTR009
Case Length : 7 Pages
Period : 1998-2001
Organization : Daimler Benz Chrysler Corporation
Pub Date : 2001
Teaching Note : Available
Countries : India, North America, Europe
Industry : Auto and Ancillaries

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It's no surprise that Schrempp is running the show. What is surprising is the way in which he is putting the two organizations together: forcing head-on confrontations, with the survivors left to run the company."

- TIME, May 24, 1999, commenting on Daimler-Chrysler CEO, Jurgen Schrempp's style of management.

Introduction

In May, 1998, Daimler-Benz1 and Chrysler Corporation,2 two of the world's leading car manufacturers, agreed to combine their businesses in what they claimed to be a "merger of equals."

The DaimlerChrysler (DCX) merger took approximately one year to finalize. The process began when Jurgen Schrempp3 and Robert Eaton4 met to discuss the possible merger on January 18, 1998. After receiving approval from a number of groups, (Refer Exhibit I), the merger was completed on November 12, 1998. The merger resulted in a large automobile company, ranked third5 in the world in terms of revenues, market capitalization and earnings, and fifth6 in the number of units (passenger-cars and commercial vehicles combined) sold. DCX generated revenues of $155.3 billion and sold 4 million cars and trucks in 1998. Schrempp and Eaton jointly led the merged entity, as co-chairmen and co-CEOs.

DCX sources were confident that the new company was well poised to exploit the growth opportunities offered by the global automotive market in terms of geographical and product segment coverage. (Refer Exhibit II for Daimler Benz and Chrysler's product ranges)

However, analysts felt that to make the merger a success, several important issues needed to be addressed. The most significant of these was organizational culture. German and American styles of management differed sharply. A cultural clash would be a major hurdle to the realization of the synergies identified before the merger. To minimize this clash of cultures, Schrempp decided to allow both groups to maintain their existing cultures. The former Chrysler group was given autonomy to manufacture mass-market cars and trucks, while the Germans continued to build luxury Mercedes. However, analysts felt that this strategy wouldn't last long. When Chrysler performed badly in 2000,7 its American president, James P Holden, was replaced with Dieter Zetsche from Germany.

Daimler-Chrysler Merger: A Cultural Mismatch? - Next Page>>

1] Daimler-Benz was formed with the merger of two German automobile manufacturers: Mannheim based Benz & Co. and the Stuttgart-based Daimler Motor Company (DMC) in 1926.

2] The US based Chrysler was a major automobile manufacturer with headquarters at Auburn Hills.

3] CEO of Daimler-Benz.

4] Chairman and CEO of Chrysler Corporation.

5] After General Motors and Ford Motor Company.

6] After General Motors, Ford, Toyota and Volkswagen.

7] Chrysler reported a third quarter loss of $512 million for the period ending September 30, 2000. Its share value had slipped below $40 from a high of $108. Since the merger, Chrysler's market share fell from 16.2% to 13.5%.

 

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