The DaimlerChrysler merger of 1998 was accepted with anticipation of greatness by analysts, stockholders, and the auto industry. Both companies had a global presence and combined heralded a revenue of 154 billion and 5.6 billion in profit, combined. However, this merger ended up in divorce due to cross-cultural problems, production and manufacturing glitches, competition, lack of demand, , and incompatible brand portfolios.
On the Hofstede dimension, Germans rank very high on individualism. They are conservative and value privacy, politeness and formality. Individualism is not conducive to a combined effort. This need for individualism as a culture affected the overall efforts to combine knowledge and skills. Daimler employees were competitive and resented the Chrysler division. Efforts and goals were not combined and there was a lack of synergy.
One of the reasons for the merger was to combine their operations, share R&D know-how and joint sales. As a result of the lack of cooperation there were production manufacturing glitches. Manufacturing was not properly streamlined. Both companies had very different methods of manufacturing and production. There was no learning from one another or implementation of each other’s best practices.
Competition in the auto industry is always tense. Toyota, for instance was the most efficient manufacturer and quality and consumer satisfaction. DaimlerChrysler’s goal was to become a major global player. These goals were not realized duet other challenges Daimler branded vehicles faced in maintaining their position as a luxury and quality tradition and Chrysler facing issues of safety. Chapter 7 lists the guidelines for a successful alliance.
The number one factor is choosing a partner with compatible strategic goals and objectives with whom the alliance will result in synergies through the combined markets, technologies, and management cadre.
They did share the same goal having a global presence, having a broad product range and technology leadership. However, these goals did not result in synergy, a mutually successful bond. The merger plan was to combine two very different brand portfolios. Daimler-Benz targets the upscale market while the Chrysler targets the low end/sub-compact market.
Lack of demand also hindered the success of the DaimlerChrysler merger. Customer demand for Chrysler's gas guzzling SUV’s and Daimler's expensive luxury vehicles was down due to the state of the economy.
In May of 2007 DaimlerChrysler demerged. The merger was a failure and as a result Daimler lost big. How could this failure have been avoided? One could reason that clashing of the two cultures is something that is without solution. However, as we have seen with the Renault-Nissan alliance, two cultures that clash and on paper look impossible can be very successful.
Negotiations were formal. Less formal, more personal negotiations between the German and American executives with an impartial mediator could have offered better solutions to issues before the actual merger took place. It appears to me that the merger went through rather prematurely without actual solutions to problems that they may actually face once combining the two companies. Issues such as how to properly merge the two brands, how to foster compliance in learning each other’s best practices.
I believe that a successful alliance begins with leadership. A more effective leadership that is non-biased or without prejudice would be more successful. The resentment of Chrysler by Daimler should have been addressed. All employees not on board for the common good of the two companies should have been let go or moved to a different position.
Lastly, the auto economy was suffering, and the consumer demand for luxury or gas guzzling vehicles was low. There was a lack of innovation during the post merger period. Innovation was not even discussed during the premerger negotiations. New vehicles aimed at what the customers were actually demanding may have allowed this union to have been a successful one.