Profesor: Isidro Velarde. Tarea #1. Agosto/2010
Daimler-Chrysler Merger: A Cultural Mismatch?: Introduction
In May, 1998, Daimler-Benz1 and Chrysler Corporation,2 two of the world's leading car manufacturers, agreed to combine their businesses in what they claimed to be a "merger of equals." The DaimlerChrysler(DCX) merger took approximately one year to finalize. The process began when Jurgen Schrempp3 and Robert Eaton4 met to discuss the possible merger on January 18, 1998. After receiving approval from a number of groups, (Refer Exhibit I), the merger was completed on November 12, 1998.
The merger resulted in a large automobile company, ranked third5 in the world in terms of revenues, marketcapitalization and earnings, and fifth6 in the number of units (passenger-cars and commercial vehicles combined) sold. DCX generated revenues of $155.3 billion and sold 4 million cars and trucks in 1998. Schrempp and Eaton jointly led the merged entity, as co-chairmen and co-CEOs. DCX sources were confident that the new company was well poised to exploit the growth opportunities offered by the globalautomotive market in terms of geographical and product segment coverage. (Refer Exhibit II for Daimler Benz and Chrysler's product ranges). | |
However, analysts felt that to make the merger a success, several important issues needed to be addressed. The most significant of these was organizational culture. German and American styles of management differed sharply. A cultural clash would be amajor hurdle to the realization of the synergies identified before the merger. To minimize this clash of cultures, Schrempp decided to allow both groups to maintain their existing cultures.
The former Chrysler group was given autonomy to manufacture mass-market cars and trucks, while the Germans continued to build luxury Mercedes. However, analysts felt that this strategy wouldn't last long. WhenChrysler performed badly in 2000,7 its American president, James P Holden, was replaced with Dieter Zetsche from Germany. Analysts felt that Zetsche would impose Daimler's culture on its American counterpart. A few senior Chrysler executives had already left and more German executives were joining Chrysler at senior positions.
In an interview to the Financial Times in early 1999, Schremppadmitted that the DCX deal was never really intended to be a merger of equals and claimed that Daimler-Benz had acquired Chrysler. Analysts felt that this statement probably wouldn't help the merger process.
Clash of Cultures.
DCX's success depended on integrating two starkly different corporate cultures. "If they can't create a climate of learning from each other," warned Ulrich Steger, amanagement professor at IMD, the Lausanne business school, "they could be heading for an unbelievable catastrophe." Daimler-Benz was characterized by methodical decision-making while Chrysler encouraged creativity. Chrysler was the very symbol of American adaptability and resilience. Chrysler valued efficiency, empowerment, and fairly egalitarian relations among staff; whereas Daimler-Benz seemed tovalue respect for authority, bureaucratic precision, and centralized decision-making. These cultural differences soon became manifest in the daily activities of the company. For example, Chrysler executives quickly became frustrated with the attention Daimler-Benz executives gave to trivial matters, such as the shape of a pamphlet sent to employees. Daimler-Benz executives were equally perplexedwhen Eaton showed his emotions with tears in a speech to other executives. Chrysler was one of the leanest and nimblest car companies in the world; while Daimler-Benz had long represented the epitome of German industrial might (its Mercedes cars were arguably the best example of German quality and engineering). | |
Another key issue at DCX was the differences in pay structures between the two...