Daimler Chrysler Emulsion

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The DaimlerChrysler emulsion
http://www.economist.com/node/341352

WHEN, two years ago, Daimler-Benz, Germany's most profitable car company, and owner of the world-beating Mercedes marque, revealed that it was merging with Chrysler, the smallest but most efficient of America's Big Three car producers, the two companies embarked on a cross-border deal based on what seemed to be impeccable industrial logic. Cross-border mergers are notoriously tricky. For DaimlerChrysler to succeed requires cohesion not just between two headquarters, in Stuttgart and Auburn Hills, Michigan, but also between a host of offices and factories with different national and corporate cultures. To overcome such differences, the merged company took an unusual approach. In its pre-merger planning Daimler put little weight on the fact that the deal would be a cross-border one. Apparently, it assumed that this would create no special problems. According to Eckhard Cordes, one of three Daimler managers to take part in the pre-merger discussions with Chrysler (the others were Jürgen Schrempp, the group's chairman, and Jürgen Hubbert, a board member responsible for Daimler's Mercedes-Benz car division), questions raised by the deal's cross-border nature were not specifically asked until after its broad terms had been agreed. Mr Cordes says that three big issues preoccupied the Daimler team. First, against a background of consolidation in the car industry, they were trying to put together two companies with strong and distinctive heritages, so how best could they do this? Second, given that there was no precedent for such a merger, was the deal at all feasible? And third, were Daimler and Chrysler bold enough to manage the difficult task of post-merger integration successfully? None of these issues, says Mr Cordes, had an explicit cross-border element: they would have applied equally had the deal been between two German companies. The solution to post-merger integration, for instance, was to be ruthless over efficiency and planning, no matter where the deal. At the same time, however, the questions were formulated in the knowledge that profound difficulties over differing locations and cultures would have to be tackled if the merger were to succeed. These difficulties were aggravated by a justifiable feeling among those on the American side that this was no merger of equals, but rather a deal in which Daimler was calling the principal shots. Chrysler's middle managers and engineers saw it as a sell-out to foreigners, and feared an invasion of rigid Teutonic working practices into their own rather freewheeling company. The potential clash of cultures was thus corporate as well as national: could a bunch of process-led German engineers work effectively with Chrysler's hunch-inspired, risk-taking bosses?

Two cultures, one company
By some measures, the fact that DaimlerChrysler has got as far as it has since 1998 has been nothing short of miraculous. Despite plenty of bumpy moments, the combination has held together. “We are absolutely happy with the development of the merger,” says Mr Hubbert. “We have a clear understanding: one company, one vision, one chairman, two cultures.” DaimlerChrysler has surmounted barriers as simple but important as the time difference between Germany and America. Managers from both firms criss-cross the Atlantic in a stream of meetings and workshops, seeking ways to drive down expenses and share future development costs. To reduce the wear-and-tear of constant travel, a specially converted aircraft helps them to catch up on sleep. In an ironic twist, DaimlerChrysler has leased space in New York's Chrysler Building so that travel can be further reduced. Moreover, the new firm has continued to expand. On March 27th, for example, it announced a deal with loss-making Mitsubishi Motors of Japan, which should strengthen DaimlerChrysler's plans for small cars. And on June 26th it spent $428m on a 10% stake in Hyundai of South Korea....
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