“Crafting a Vision at Daimler-Chrysler” Case Analysis

In reviewing this article it was observed that some employees were skeptical of the merger between Chrysler and Daimler-Benz. Daimler-Benz employees were proud of the elite image and were concerned about having that tarnished by another company. Chrysler employees voiced concerns about the addition of a foreign partner to one of America’s auto manufacturers. Employees needed reassurance that this merger was going to be a success! In light of all the adversity both companies faced since announcing their plans to merge, how did they remain so steadfast in their commitment to pursuing this merger?

What kept them believing this merger was a good deal that deserved a second look? To answer these questions I want to step back and discuss what I believe needs to be said to raise spirits. We all know that the auto industry is always in the midst of transformation. We are in a period of auto manufacturing which defies all limits and crosses all borders, in which everything works with everything else, everywhere, all the time. It’s a world where solutions matter most, where size makes a difference, and where success will depend upon our ability to align ourselves to function in a seamless way to answer our customers’ every need.

Other companies are indeed driving fundamental changes in customer requirements. The simplest way to describe the shift I see is this: the pure product era is over. Of course, Chrysler and Daimler-Benz have always engineered great products and have been organized to engineer great products. And while great products will always be their foundation, they need to realize that great products are no longer going to be enough, because customers are looking for solutions to new challenges presented by a transformed technological world.

If Daimler-Chrysler is going to lead in this next era of auto manufacturing, they’ve got to keep moving in that direction. So, they must begin to think about their own products through the prism of this new marketplace.

Ask themselves: What new markets are created, what industries are transformed and how do we play to win in those emerging markets? And must begin to think about having enough scale in the organization to take on major outsourcing and support projects on a global basis?

They need to consider culture. How do they preserve what is best about the company and at the same time become quicker, more agile, and more customer-focused? We know that success will require a different kind of collaboration across divisions, units and functions. The legacy and people of Daimler-Chrysler are capable of doing and achieving and being so much more then what they are now. With Daimler-Chrysler this new strength and our market presence makes them a much more attractive partner. And with their combined market position, they will be able to engage the auto community in building the applications that will drive demand.

They will have an incredibly powerful position at the high end of the auto market and gain access to new customers and markets. It is a rare opportunity when an auto company can advance its market position substantially and reduce its cost structure substantially at the same time and this is possible because Daimler-Benz and Chrysler are in the same businesses, pursuing the same strategies, in the same markets, with complementary capabilities. Now, some critics may say bigger doesn’t necessarily mean better, and I agree. But it doesn’t follow that bigger can’t be better especially in an industry that is maturing.

This is a merger of like businesses coming together, a merger of consolidation, not diversification. Daimler-Benz and Chrysler are in the same businesses, they understand each other, and they speak the same language. This is a merger that creates market leadership. This is a merger that we can expect to be substantially accretive. This industry is beginning to consolidate; and current technology industry dynamics are much more akin to the mature phases of other industries here mergers are not only workable, but a strategic imperative.

Mergers have succeeded: When the combination is about bringing like businesses together, not making forays into new businesses; when the combination helps to achieve clear market leadership; The Daimler-Chrysler merger meets all of these measures of success and then some. The more that people look at this deal, the more they conclude that this is not simply a choice between merging and not merging.

This is a choice between taking the hill and charging ahead or retreating and starting over. This is a choice between embracing the revolution that is changing our industry or attempting in vain to preserve the status quo. This is a choice between leading or following.