Daimler-Chrysler: Merger of equals or global fender Bender?

Daimler-Chrysler had two different people with two different management philosophies operating the same company. The fundamental differences in management, operational and decision making styles caused a significant discord between the Germans and the Americans. As with any merging of companies, there were going to be different corporate cultures, and in particular different national cultures, into the new corporation. The national culture of a company is an integral part of a company's overall corporate culture.

The corporate culture clash prevented Daimler-Chrysler from achieving the promised synergies. Cultural differences created great tension; 1. The Germans wanted to put unpopular issues on the table from the beginning; thereby expediting the integration of the two companies. The Americans wanted to ease into changes, 2. Differences in pay scales, and travel and expense policies added fuel to the situation, 3. Differences in management, financial, operational and decision making styles and staffing soon became apparent.

Distance and different time zones added to the unease between the entities because the Germans always seemed to be functioning at a higher, more efficient level due to their early time zone advantage each business day. Furthermore, synergy can only occurs when two companies together can make and market products more efficiently than they were able to do apart.

Why would Eaton and Schrempp agree to share the top position of the merged entity?

Schrempp and Eaton agreed to share the top positions in order to ensure that both companies' interests were represented. Also the merger of these two corporations both had two different cultures and business techniques; in order to make a smoother transition, it made sense to keep two the two top executives who had the know how and the knowledge to see these companies through the merger. With the two companies in different nations, it also

made good business sense for two people to function in the top position during the merger for the time it would take to totally integrate the companies.

"To keep things equal both Daimler's chairman Jurgen Schrempp and Chrysler's chairman Robert Eaton agreed to share the power for three years - until Eaton retired." (Mescon, Bovee, & Thill (2002.) This shared position and power was supposed to help preserve the idea that the new company was a merger of equals. However it soon became apparent that Daimler was running the show; the management board's structure was changed to 8 Germans and 5 Americans, with a total of 4 less members.

Which of these stakeholders benefited the most from the merger: the original Chrysler shareholders or the new Daimler-Chrysler shareholders? Explain your answer. Who benefited most? Those who sold their Chrysler stock at the highest price offered before the merger. Why? The value of the Daimler-Chrysler stock plummeted following the merger when profits became stagnant. It didn't help the situation when the company stock was no longer listed on the S&P 500 because the company wasn't incorporated in the United States. (Mescon, et al, 2002).

Who else benefited? Robert Eaton did when three years after the merger he walked away a very rich and famous man. Daimler and its shareholders based on the settlement of a suit against Daimler; "Florida's public pension fund, the State Board of Administration, announced Friday a $300 million settlement from DaimlerChrysler AG -- possibly the largest settlement ever for non-accounting securities fraud litigation." (Tampa Bay Business Journal, 2003.)

There are other law suits that have not yet reached settlement alleging that Daimler did a very clever takeover and didn't have to pay the price of the real value of the stock; "...expert witness, investment banker Conrad Meyer of Gleacher Partners, agreed, and argued that a takeover should have commanded a price of 61.50 dollars a share instead of 51 dollars a share. "Why give up control for less than the company is worth on a stand-alone basis?" Meyer testified." (Channel News Asia, 2003.)

Visit Daimler-Chrysler's Web site to learn about their shared beliefs and values. Which beliefs and values seem to be more characteristic of German business culture and practices? Which ones seem more American? Why?

"Organizational anthropologist Geert Hofstede defined culture as "the collective programming of the mind that distinguishes the members of one category of people from those of another."" (Keegan and Green, 2002.) America's Chrysler Corporation was not steeped in tradition, instead it had a corporate culture that pushed responsibility and decision making throughout the company encouraging creativity and innovation. (Keller, 1998.)

That is why this statement about technological expertise on the Daimler-Chrysler web site is truly about Chrysler; "Technological expertise, speed and flexibility have made Daimler-Chrysler the driving force behind progress in the automotive industry."

Daimler is a German company; "They are more structured and hierarchical. Decision-making is concentrated at the top of the pyramid. Status and relationships with other employees are governed by title." (Keller, 1998.) This corporate structure is the very reason this statement about tradition on the-Daimler Chrysler web site is so true of German companies, "Cultivating tradition is therefore the diversified and responsible assignment of Daimler-Chrysler Classic."

Chrysler was geocentric and Daimler ethnocentric in their corporate cultures before the merger. On the investor relations page at Daimler-Chrysler is this statement, "On these following pages, we offer you a wide variety of information related to the shares, the results of DaimlerChrysler and our integrated, value-based controlling system." The word controlling is key. This value definitely belongs to the Daimler side of the company.

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