Daimler Crysler Case

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Question 1
What were your expectations (prior to the developments in 2007) of the DaimlerChrysler merger and its future prospects in the global auto industry? Initially, at the time of the merger there were many aspects in favor of the DaimlerChrysler merger, such as: •Chrysler gains a toehold in Europe, access to Daimler’s technology base and get an image boost from Mercedes. •Daimler should benefit from Chrysler’s strong U.S. presence, design flair and manufacturing process that have made it the world leader in profit-per-vehicle. •Future products could be derived off common platforms–the chassis that forms a car’s foundation–and share major components. Mercedes, for instance, might develop a luxury pickup truck based on a Chrysler platform at a much lower cost than it could otherwise. •By teaming up with Daimler, Chrysler will gain greater access to the European market where Mercedes has more than 1,000 dealers. Chrysler has only 1% of the European market, compared to 12% each for GM and Ford. •The merger may also help Chrysler overcome the problem that has dogged it in recent years–quality. The company gets high grades for design, production and profitability, but still lags its domestic and Japanese rivals on quality ratings. Though, after the honeymoon DaimlerChrysler encountered a multitude of problems concerning compatibility and industry influences. In my opinion these problems could have been solved if the management would have been capable and trained. It could be expected that the sheer sizes of the undertaking made the merger complicated and take years to complete. The different cultures–Mercedes more conservative and stolid, Chrysler more freewheeling and dynamic–would be problematic to integrate. When Chrysler bought American Motors Corp. from Renault in the 1980s, many of Chrysler’s old-line executives resented ideas presented by AMC’s French managers. Also, a merger between Volvo and Renault collapse in 1994 because of culture differences and nationalistic jealousies. One company doesn’t easily and naturally dominate this merger. There is a lot of room for internal conflict and cultural clashes. While the deal was presented as a merger of equals, Daimler had the upper hand because of the way the merger is structured.

Question 2
Analyze and evaluate Daimler-Benz and Chrysler Corporation’s strengths and weaknesses in 1998.
StrengthsState of art engineering
European market
Diesel technology
Upcoming presence in U.S.Low-cost producer
Supplier network
Strong U.S. presence
Diesel technology
WeaknessesHigh production cost
Lack of diversity
Conservative management
Lack U.S. marketing competence
Lack of global strategyLack of quality
Low profits
Minimum European presence
Lack of global strategy
Lack of lending department

In 1998 Daimler-Benz was highly rated for luxury cars, obviously higher quality end vehicles require higher production costs. Daimler-Benz focused mainly on the European market. In the industry, excess worldwide manufacturing capacity and increased global competition became a threat that Daimler-Benz was unable to defeat with its current strengths. To remain competitive they are looking for partnerships with other manufacturers, expanding into new markets and cutting production costs. Chrysler was the low-end, low cost auto manufacturer with a strong presence in the U.S. Chrysler constantly remained behind GM and Ford in rankings. One of the problems that have dogged Chrysler in recent years is quality. A massive glut of autos worldwide has made the industry ripe for consolidation, as manufacturers scramble to cut production costs and hold market share while expanding around the globe. One reason for Chrysler to expand beyond North America is to mitigate swings in the U.S. economy and to enter growth markets abroad. Likely Chrysler wouldn’t survive without a merger.

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