Daimler Chrysler post Merger Integration

The case ‘The ‘DaimlerChryler Post-Merger Integration’ gives an overview of the merger between DaimlerBenz AG of Germany and Chrysler Corporation of the US. The case focuses on the post-merger integration and the various problems faced by the merged entity. It also explores the enormous cultural differences and management styles and the problems to realize the synergies identified prior to the merger.

Why did they decide to merge?At the time of the merger both the companies were hugely profitable and the purpose was to ensure long-term prosperity as well as exploit large potential synergies. The production and market concentration matched each other very well. Chrysler so far had failed to establish greater geographical scope (90% of sales concentrated to North America) and expected to improve quality and technical capability throughout this merger. Additionally it had become an attractive target for a take-over.

DaimlerBenz was and had been for a long time very profitable in its car section but was only operating in the high value markets and needed for long term prosperity to increases its volume. So far it had not been able to take advantage of the booming US market. Both companies wanted to create a much larger, globally based enterprise to compete in major markets of the world.

Expected Synergies:•World leader in transportation•Savings resulting from economies of scale in R&D and procurement •Revenue enhancement•Complete spectrum of products (Jeep and SUV segment for DaimlerBenz, luxury end for Chrysler) •Higher productivity through better capacity utilization •Exchange of technology•Higher bargaining power, lack of capital constraint

Happenings during the integration phase:•Taxes and government issues were decided first•Integration took place directly afterwards•Decision for a back-end merger -> low integration depth, synergies stem from the administrative level rather than from the operation/sales •Speed was defined as crucial •Sales and Marketing experienced a struggle over brands, as DaimlerBenz wanted to keep the brands separate (concern about brand dilution)

•Separatist attitude carried over into manufacturing and procurement policy, brand protected at all cost, avoidance of cross-brand platforms (quality/long-term vs. cost-effective orientation) •Information Technology and Finance as one of the few integrated parts •Doubt at the “merger of equal”

•External communication was adapted to German standards, betraying former investors •Creation of “knowledge islands” as a result of the “tech clubs” (no connection to other parts of the company)

Critics and Recommendation:•Integration issues should have been considered first (even before tax and government issues), as it is the largest cross-boarder combination ever •Integration phase was too short, “honeymoon” phase was totally skipped •Rethinking of integration strategy to better use of synergies: higher degree of integration •Creation of a corporate identity (up to now: name of company is never associated with the products!)

•Millions spent on post-merger cultural sensitivity workshops (still diametrically opposite management thinking!) •Huge employee and management losses due to failed integration, no real “harmonization” of compensation, the system was just adjusted to the US system and only for a small group of top management •Lack of governance: no coordinated course of action of the top management ->Flatten the structure, no double executives

•Development of a mutually accepted vision and mission statement •Only workshops concerning personal lifestyles were organised, never about management styles •Only the top management gets along quite well

“Cultural Clash” could be foreseen:DaimlerChrysler- Conglomerate with 21 different businesses- Highly centralized car and truck manufacturer – Hierarchical: traditional top-down management – Fast and lean decision making: mid-level employees – Well-structured decision-making processallowed to take decisions – Bureaucratic- More informal, team-orientated, creative, innovative – Disciplined: Planning, Organizing, Controlling- Success driven, setting goals, directing, monitoring implementation – Conservative, efficient, safe- the risk-taking underdog

– Less salary but high expense budget- High salary and bonus