Daimler Chrysler Merger Failure

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  • Topic: Daimler AG, Daimler-Benz, Mercedes-Benz
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Daimler Chrysler Merger Failure

Abstract

This paper discusses about the reasons of merger failure between two big auto manufacturing organizations Daimler Benz AG and Chrysler Corporation. One of the main areas of discussions would be the organizational cultural issues between the two companies as they are from two different countries United States of America and Germany. The two organizations merged with intent to enter into the top three ranking in the industry in terms of revenue, market capitalization and earnings.” (Daimler-Benz, 1998). The merger did not last long and it turned out to be big failure. The positive side of the merger would people from different countries could have brought different ideas which could have lead to a better auto products in the market but the inflexibility of both the organizations have made the merger a failure..

Background

Chrysler before merger: Chrysler is a US based automaker founded by Walter Chrysler in the year 1925. Its headquarters was located in Detroit, MI, USA. Chrysler focus was on Cars, Minivans, Sport-utility vehicles and Trucks. Some of the signature cars produced by Chrysler were Chrysler K-310 and Chrysler six. “Within a decade of its founding, Chrysler Corporation's leadership in innovation had earned for it the label of Detroit's "engineering company." Chrysler's list of early automotive "firsts" included Floating Power (a new method of mounting engines to isolate vibration), replaceable oil filters, downdraft carburetors and one-piece curved windshields. Chrysler entered a higher level of competition with its richly appointed Imperial series. With a custom-built body from LeBaron or Briggs, a 145-inch-wheelbase chassis, a 125-horsepower engine and a price tag of $3,145, a typical Imperial of the early 1930s rivaled a Duesenberg in style, but cost only about a third as much!” (Chrysler History, n.d.) “Known in the years after World War II for its well-engineered cars, it has spent the last three decades bouncing between highs and lows. It had been to the edge of bankruptcy twice. The company encountered financial turbulence in the late 1970s that prompted it to seek a Congressional bailout.” (Maynard, 2009). “In 1979, Congress and President Carter rescued Chrysler from bankruptcy. In 1980, Carter signed a Chrysler Loan Guarantee act, providing $1.5 billion in loan guarantees. Sales improve dramatically with the debut of the well-received K-car platform and the introduction of the Dodge Caravan and Plymouth Voyager, the first modern minivans. Chrysler pays off government loans seven years early.”(Wilson, 2009). “In 1987, Chrysler bought the No. 4 automaker, American Motors, but the subsequent consolidation prompted another financial crisis that led to a restructuring of the company. In the 1990s, Chrysler came back again, with vehicles like the powerful Dodge Viper sports car and its Jeep lineup.” (Maynard, 2009).

Daimler-Benz before merger: “The United Kingdom-based Daimler Motor Company traveled a complicated path in its 112-year history. It was once the Royal automobile for all British Royal family members, but was ultimately rejected in favor of the Rolls-Royce.” (Wagner, n.d.). Daimler and Benz were two different companies. Daimler motor company was founded by Gottlieb Daimler and Benz was founded by Carl Benz. “The invention in the 1880s of the high-speed engine and the automobile enabled Gottlieb Daimler and Carl Benz – independently of one another – to lay the foundations for the motorization of road transport. With the help of financial backers and partners, they both invested their private developments in their own enterprises – in Mannheim, Benz founded the firm Benz & Cie. in October 1883, and Daimler-Motoren-Gesellschaft (DMG) was formed in November 1890”. (The three pointed star, 2008). In the year...
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