POST MERGER INTEGRATION

DaimlerChrysler: Lessons in Post-Merger Integration



DaimlerChrysler: Lessons in Post-Merger Integration

Q1. Taking into account the changing strategic and competitive environment of the automobile industry in the 1990's, identify and evaluate Daimler-Benz and Chrysler's objectives in the merger and how well was the pre-acquisition planning handled?

Automobile industry in the 1990s

The 1990s was a time that imposed serious challenges for the automobile industry. Although, the two companies, Daimler-Benz and Chrysler were quite different from one another, they both faced challenges of a different nature.

Chrysler had proven itself in previous years in overcoming various challenges, but they had to do it again in the 1990s. They once again had to overcome the challenge of facing bankruptcy. At the same time, Daimler-Benz had to confront the challenge of sustaining its market position in the international market for passenger cars.

On a similar level, both companies had to face the challenges that hit the entire automobile industry. These were mainly, the existence of overcapacities, strong position of their clients and rising environmental awareness.

Daimler-Benz and Chrysler's Objectives in the Merger

Collectively, when the two firms decided to merge, their goal was to be a worldwide automobile provider of transportation products, in a manner that generated superior value for their customers, employees and their shareholders (DaimlerChrysler, 1999, p.n.d).

They both believed that this unanimous goal could be achieved through their collective expertise of their unique know-how, their uncommon work processes along with their entirely opposing organizational cultures. The aim was to utilize their shared distribution channels with the integration of their shared technologies in order to attain synergized results.

Following the prior negotiations by the two car makers in January 1998, Robert J. Eaton CEO of Chrysler Corporation with Jürgen E. Schrempp, CEO of Daimler-Benz announced the birth of a Global Car Company: “DaimlerChrysler” on the 7th of May 1998 in London (DaimlerChrysler, 2003, p.n.d).

Daimler-Benz

Previous Chairman, Edzard Reuter of Daimler-Benz's Management Board had laid the foundations anticipating a possible merger in the future in the early years of 1990. When Schrempp took over in 1995, the top management anticipated that their high end vehicle portfolio was at the saturation point of the market and following some research, they anticipated that Mercedes-Benz would not be able to maintain its growth in sales above one million cars on an annual basis.

They feared that their existing markets had reached the maturity stage and their cars were priced too high for consumers in the developing economies. They realized that if they were to maintain their premium brand status, it would be at the cost of limited expansion and growth.

Therefore, from the view point of the German car manufacturer, the merger with Chrysler seemed very opportunistic, which would enable them to attain an imperative competitive advantage in the future and would also strengthen their position in the US markets which at present was less than 1% (Appel et al, 1998, p.109).

They considered Chrysler as the perfect opportunity for this venture. The characteristics of revenues, efficiency, and low production costs in ...