The Daimler-Chrysler merger came with the intent of a huge change. When the two made the merge they had high potential with both their backgrounds which helped them become the world’s fifth largest auto company (C-41). However, it was never foreseen that Chrysler which was part of the 3/4 of U.S. auto sales would have a complete turnaround in profits within a couple years (C-41). Being a strong company based upon brands and products isn’t everything for success as shown here.
The merger provided the duo with a large variety of vehicle choices to different consumers. However the downfall came when Chrysler was threatened by other competition and declining sales (C-41). The opportunity was there and Daimler-Chrysler could have made something of it with a topnotch management team. Merging two companies also deals with merging different cultures and ideas together as well as strategies.
The domination of Daimler-Chrysler brief success was due to the idea that they were providing brands and products that customers wanted at the time and created a chunk of financial capital. Without creating a balance of both financial and strategic controls put them at a loss for the idea that they didn’t create a guide for decision making for the long-term (35). Economically speaking Chrysler downfall was they were known for their gas-guzzling SUVs, trucks and minivans.
Chrysler had been in trouble before in the 1970s because of economic changes and the oil crisis (C-42). Being able to build up from that disastrous event Chrysler’s management should have been aware what was about to essentially happen all over again with the increase of oil prices in the beginning of the 2000 decade.
This also marked the new trend of consumers substituting the high fixed gas price of Chrysler vehicles with the more affordable Asian market (C-41). Now that Chrysler is owned by Cerberus, this also means all of its issues are owned by them as well. A major issue that Cerberus was now to inquire was the challenge of the contract that Chrysler had of about $18 billion (C-44).
This was the contract that Chrysler shared with its retirees in regards to health care liabilities and to change it is the threat of a lot of frustrated retirees of the past and the ones to come. Another situation involved was how Chrysler had announced a product development that would cost $3 billion a year (C-44).
This effort is now on Cerberus shoulders as they would have to invest for current improvements of Chrysler models as well as new models to better the situation. Cerberus also was entitled to continue the turnaround program that DaimlerChrysler at the time had initiated to happen by 2009 (C-44).
This included decreasing material costs, the firm’s production capacity, closing a plant in Delaware as well as eliminating shifts at other plants (C-44). Doing this as well as cutting 13,000 jobs over the next couple years was their plan “…to save $4.5 billion and bring back profitability by 2008” (C-44). These challenges not only interfered with the acquisition but set up high expectations for the private company Cerberus to create a plan of recovery. These expectations increased as Cerberus was able to make a deal with the UAW about negotiating for a new contract about health care.