Corporate Level Strategy
no. 1-0071
This case was written by Professor Sydney Finkelstein
© 2002 Trustees of Dartmouth College. All rights reserved. For permission to reprint, contact the Tuck School of
Business at 603-646-3176.
The DaimlerChrysler Merger
Summary
In the mid-1990s, Chrysler Corporation was the most profitable automotive producer in the world. Buoyed by record light truck, van, and large sedan sales, revenues were at an all-time high. Chrysler had taken a risk in producing vehicles that captured the bold and pioneering
American spirit when imports dominated the market the Dodge Ram, the Jeep Grand
Cherokee and the LH Sedan Series. In these vehicles Chrysler found an instant mass appeal, and its U.S. market share climbed to 23% in 1997. As revenues and market share rose, product development costs shrank to 2.8% of revenues - compared with 6% at Ford and 8% at General Motors1. Chrysler's integrated design teams and noncompetitive relationships with suppliers kept costs down, while its marketing department scored success after success in gauging consumer tastes.
Chrysler had always fashioned itself the bold and risk-taking underdog. It had brought itself back from the brink of bankruptcy four times since the Second World War, and its boombust revenue flow pattern had earned it a "comeback kid" reputation. With $7.5 billion in cash on hand and a full range of best-selling products, Chrysler finally seemed ready in 1997 to weather the volatile American automotive business cycle on its own without government bailouts or large-scale R&D cutbacks2. Its wealth did not go unnoticed: Investor
Kirk Kerkorian, a 13% shareholder, threatened to mount a takeover -- citing "the management's practice of cash hoarding" as his reason3.
1 Waller, David. Wheels on Fire: The Amazing Inside Story of the DaimlerChrysler Merger. London: Hodder & Stoughton,
2001, p.108.
2 Vlasic, Bill and Bradley Stertz. Taken for a Ride: How Daimler-Benz Drove off with Chrysler. New
This case was written by Professor Sydney Finkelstein
© 2002 Trustees of Dartmouth College. All rights reserved. For permission to reprint, contact the Tuck School of
Business at 603-646-3176.
The DaimlerChrysler Merger
Summary
In the mid-1990s, Chrysler Corporation was the most profitable automotive producer in the world. Buoyed by record light truck, van, and large sedan sales, revenues were at an all-time high. Chrysler had taken a risk in producing vehicles that captured the bold and pioneering
American spirit when imports dominated the market the Dodge Ram, the Jeep Grand
Cherokee and the LH Sedan Series. In these vehicles Chrysler found an instant mass appeal, and its U.S. market share climbed to 23% in 1997. As revenues and market share rose, product development costs shrank to 2.8% of revenues - compared with 6% at Ford and 8% at General Motors1. Chrysler's integrated design teams and noncompetitive relationships with suppliers kept costs down, while its marketing department scored success after success in gauging consumer tastes.
Chrysler had always fashioned itself the bold and risk-taking underdog. It had brought itself back from the brink of bankruptcy four times since the Second World War, and its boombust revenue flow pattern had earned it a "comeback kid" reputation. With $7.5 billion in cash on hand and a full range of best-selling products, Chrysler finally seemed ready in 1997 to weather the volatile American automotive business cycle on its own without government bailouts or large-scale R&D cutbacks2. Its wealth did not go unnoticed: Investor
Kirk Kerkorian, a 13% shareholder, threatened to mount a takeover -- citing "the management's practice of cash hoarding" as his reason3.
1 Waller, David. Wheels on Fire: The Amazing Inside Story of the DaimlerChrysler Merger. London: Hodder & Stoughton,
2001, p.108.
2 Vlasic, Bill and Bradley Stertz. Taken for a Ride: How Daimler-Benz Drove off with Chrysler. New