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 : Automobile & Automotive

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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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Introduction Contd...

In an interview to the Financial Times in early 1999, Schrempp admitted that the DCX deal was never really intended to be a merger of equals and claimed that Daimler-Benz had acquired Chrysler. Analysts felt that this statement probably wouldn't help the merger process.

Clash of Cultures

DCX's success depended on integrating two starkly different corporate cultures. "If they can't create a climate of learning from each other," warned Ulrich Steger, a management professor at IMD, the Lausanne business school, "they could be heading for an unbelievable catastrophe." Daimler-Benz was characterized by methodical decision-making while Chrysler encouraged creativity. Chrysler was the very symbol of American adaptability and resilience. Chrysler valued efficiency, empowerment, and fairly egalitarian relations among staff; whereas Daimler-Benz seemed to value respect for authority, bureaucratic precision, and centralized decision-making. These cultural differences soon became manifest in the daily activities of the company.

For example, Chrysler executives quickly became frustrated with the attention Daimler-Benz executives gave to trivial matters, such as the shape of a pamphlet sent to employees.

Daimler-Benz executives were equally perplexed when Eaton showed his emotions with tears in a speech to other executives. Chrysler was one of the leanest and nimblest car companies in the world; while Daimler-Benz had long represented the epitome of German industrial might (its Mercedes cars were arguably the best example of German quality and engineering). Another key issue at DCX was the differences in pay structures between the two pre-merger entities. Germans disliked huge pay disparities and were unlikely to accept any steep revision of top management salaries. But American CEOs were rewarded handsomely: Eaton earned a total compensation of $10.9 million in 1997...

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