Business

Case 4.1 - The Daimler Chrysler Merger

Introduction

On May 6, 1998, two of the world’s leading car manufacturers, Daimler-Benz and Chrysler, agreed to combine their businesses to form the third largest automobile company in the world in terms of revenues, market capitalization and earnings (fifth in terms of the number of units of passenger-cars and commercial vehicles sold). In the new company, called DaimlerChrysler (DCX) Juergen E Schrempp and Robert J.Eaton the CEOs of Daimler and Chrysler respectively were named co-CEOs. Both appeared confident that the merger would generate various synergies and growth opportunities.

Schrempp remarked, “The two companies are a perfect fit of two leaders in their respective markets. Both companies have dedicated and skilled workforces and successful products, but in different markets and different parts of the world. By combining and utilizing each other’s strengths, we will have a pre-eminent strategic position in the global marketplace for the benefit of the customers. We will be able to exploit new markets, and we will improve return and value for our shareholders. This is a historic merger that will change the face of the automotive industry.”

According to Eaton, “Both companies have product ranges with world class brands that complement each other perfectly. We will continue to maintain the current brands and their distinct identities. What is more important for success is our companies share a common culture and mission……. both clearly focussed on serving the customer…….. both have a reputation for innovation and quality…….. By realizing synergies……… we will be ideally positioned in tomorrow’s market place”.

Chrysler

In 1993, the Chrysler board had appointed Robert Eaton, then a senior General Motors (GM) executive, as the new chairman and CEO, following the legendary Lee Iaccoca’s retirement. Eaton divested unrelated businesses to concentrate on car and truck making activities. He emphasised quality and...