Daimler and Chrysler Merger

Company BackgroundChryslerChrysler Corporation (CC) was founded in 1925 in America by Walter Chrysler. Currently Chrysler holds the position for being the third largest auto manufacturer in North America. The company has created a well-built reputation with its well-engineered cars that targets the middle class society. The core competences of Chrysler include efficiency and speed to market.

This is apparent through using various production methods that focuses on cost savings and mass production techniques. Using these techniques Chrysler had well received automobiles such as, the Dodge Charger, PT Cruiser, Grand Cherokee, Liberty, Wrangler and Patriot and these were in the $15,000 to $30,000 USD price range. Over the past few years the company has shown peaks of revenues followed by a heavy fall in sales, in which the US government has bailed the company out on several occasions.

At the time of the merger with Daimler Benz, the company was faced with increasing competition from the Japanese automakers, Chrysler was seeing substantial decrease in sales and was not in a dominate position in the merger. (Waller David, 2001)DaimlerDaimler Benz was incorporated in 1926 after the merger of Daimler and Benz companies. They are currently the 13th largest auto manufacturer in the world and hold the position for being the largest truck manufacturer in the world. The new company has dominated the international market with their famous line of Mercedes Benz vehicles that exhibits premium quality and luxurious attributes in the past decades.

The core competences of Daimler Benz include quality and the use of technology. Harnessing the power of German engineers and technology, Daimler brought technological changes to the entire auto industry in areas such as engine, transmission, safety and offering a rich driving experience. The notable innovations Daimler Benz has contributed to be: anti-lock braking systems, airbags, seat belt pre-tensioners and much more.

The automaker has manufacturing facilities in different regions of the world including; North America, Europe and in some Asian countries. (Waller David, 2001)Problems to Why the Merger FailedCritics often acclaimed that the merger was a match made in heaven; however this obviously wasnt the case. The two companies shared many differences that led to the fall of profitability margins. The notable problems that led to the downfall are:Management Style:

The differences in management style were apparent in the two companies. Daimler held a structured and hierarchical style where decisions were made by top management and staff-line workers had little to say to contribute to the overall decision making process. On the contrary, Chrysler exhibited a much dispersed bottom-up style where major decisions were made throughout the entire organization.

Differences in Cultural Awareness: There was a clear conflict in terms of cultural acceptance in the two companies. Since the two companies were from different international countries they had a very hard time accepting foreign cultures. For instance, Daimler had a very ethnocentric mindset. They thought the German philosophy was dominate to the culture at Chrysler, thus they werent inclined to change the internal processes of the organization.

Disparity of Wages: There was a large gap in the pay wages that workers got paid. According to Orr, Eaton, the head of Chrysler was getting paid $11.7 million while his counterpart Schrempp was being paid $2 million (Orr Deborah, 17 May 1999). The big question being asked was if the US workers would have to take a pay cut or would the Germans be given a massive pay increase? The Chrysler workforce was neglecting the idea of any pay cuts while the increasing of wages to the German workers would certainly cause many financial perils.

Differences in Business Models: There was an evident clash of business models for the two companies. Chrysler catered to a low cost production model while targeting price/fuel sensitive customers. They would rely on mass production techniques to carry out their distribution process.

On the other hand, Daimler catered to the high and premium market segment and therefore followed the high-cost / low volume manufacturing approach. The statement it provided to its customers was that Daimler was offering brand identity and exclusiveness in its vehicles. The mixing and integrating of these two models wasnt handled well and professionally.

Alternative #1Pre-merger research and analysisIt is clear from the start that not a lot of time and effort went into the deciding factors of the merger. An alternative thats being suggested claims that Daimler and Chrysler should have consulted in more thorough decision making before rushing into the merger.

By thoroughly analyzing the two companies it wont be difficult for the two companies to point out the flaws. From there they could either scrap the merger or take drastic measures to minimize the differences in the two companies. Daimler Chrysler could potentially resort to mediation and arbitration to sort out the major differences so that the two companies can cohesively work together.

Alternative #2Retain Key Executives and Increase Employee MoraleDespite the major differences in the two companies, a major downfall of the merger would be the initial loss of employee morale and motivation. It is evident as soon as the merger was announced the two companies fired key executives to downsize the work force. An alternative thats being imposed would be to retain those key executives.

When dealing with a foreign direct investment with two countries with extremely different cultures and norms, it is imperative to retain key executives from the two host companies. No one would fully understand the American culture as well as Chryslers employees and similarly to the Daimler employees having a thorough understanding of the German culture. In this specific case, as soon as the merger started to experience a downfall, employee morale soon plummeted.

Daimler Chrysler needs to develop realistic expectations about the merger, it is encouraged that the American employees really learn about the German employees (and vice versa) to make sure they have the same expectations of the merger. DC can also use a variety of approaches to help smooth the merger in relations to employee satisfaction.

DC could potentially develop programs to minimize the stress levels that employees feel during the midst of a merger. The program can be designed to help workers:Understand and manage stress levels theyre feeling over the mergerConsider new ways of thinking and applying rather than embracing old ways. Stay informed about the merger process and the implications it may have for their jobsFind new ways of team building and collaboration to help form the new entity so that employees will have a stronger sense of control and investments in their job.

A common philosophy in business is that good human capital shapes the basis for the corporation. When workers interests are aligned and strict collaboration is enforced, then the existing problems can be easily and readily solved. When DC employees are working together using cross-functional teams while exhibiting high levels of morale and motivation then they could solve the major existing problems and find new ways around upcoming problems.

Works CitedWaller David, 2001, Wheels on Fire: The Amazing Inside Story of the Daimler Chrysler Merger. London: Hodder & Stoughton