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  • Topic: Stock, Stock market, Daimler AG
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Chrysler Corporation- Negotiations
Chrysler Corporation- Negotiations

What is the situation faced by this company?

Chrysler is faced with the major decision on whether to have a possible merger or deep strategic alliance with Daimler-Benz. This American car producer is looking to expand its global reach with a Daimler, and create synergies that will positively affect both businesses. Both operate in separate markets and have separate skills sets that could potentially complement each other. This possible marriage could be very good for their shareholders in the long term. Chrysler has excellent market share in the U.S, but has limited exposer outside the U.S, in comparison to Daimler. Chrysler was absent from the European market for years and since they have been reintroduced into the market in the 1990s they have been facing some trouble establishing any kind of leadership position in the minivan market that they almost exclusively dominate in the United States. By the late 90’s they had only .7 percent of the overall European market share in Europe. This union with an established European company could open doors that otherwise would not be there without the help from Daimler-Benz.

What are the strengths and weaknesses of the company and those of its counterparty?
Chrysler:

Strengths:
Dominate the minivan market in North America- (Dodge Caravan/Plymouth Voyager is the world’s most successful minivan) • Jeep has exceptional name brand recognition
Short cycle of concept-to-market for new products • Low development costs, efficient plants, good supplier relations, creative styling. • Their cost saving effort SCORE (supplier cost reduction effort) -(Suppliers were offered the long term contract, involved in product design, and were encouraged to make cost-saving suggestions)

Weaknesses:
Lack of vertical integration
Limited International presence (Absent from European market) • Shaky financial history and poor management past
Numerous changes in upper management
Lack of a “global car”- (Lack of a car for international markets due to different American style) • Overcapacity of vehicles in the market

Daimler-Benz:

Strengths:
Highly diversified
Great historical lineage
Leadership under Schrempp strengths core competencies’ and cuts dead losses. • Restructured into multiple SBUs to concentrate on efficiency and productivity. • Good global distribution network

More than 2/3 of total revenues come internationally • More vertically integrated than Chrysler

Weaknesses:
Poor historical acquisition choices
Car segment too reliant on the Mercedes namesake
Smart car could be a possible failure
Overcapacity of vehicles in the market
Difficult barriers to entry in the Global market to grasp substantial market shares elsewhere. • High supply chain costs
Why should this company and the counterparty company want to negotiate? There are multiple reasons why companies should negotiate a merger and alliances. Negotiating allows there to be compromising and meeting in the middle about key issues involved. Some of the basic areas include knowledge, cash flows, economies of scale, and tax breaks. This specific negotiation would need to take place due to each company’s intangible capabilities. Chrysler has led the way with the relationships it maintains with their suppliers to successfully lower costs through their SCORE program. Also, Chrysler has Jeep which is one of the strongest brand names in the automobile industry. Chrysler could use this brand name and Daimler-Benz’s know-how to springboard this brand even farther into the luxury category. Also, Chrysler’s position will be boosted in Europe through the current reputation Daimler-Benz has. Finally, Chrysler will...
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