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FOREWORD

Back in 1998, Daimler-Benz, the German manufacturer of luxury automobiles, had only captured less than one percent of the American market (Daimler-Benz AG, Standard & Poor’s Stock Reports. New York: Standard & Poor’s, Inc., July 21, 1997). Meanwhile, the American Chrysler Corporation was willing to extend its international reach, especially in Europe. Given the circumstances, both companies came to the conclusion that a merger would make sense. On May 7 ^th , 1998, the merger was officially announced as the largest trans-Atlantic merger ever. However, this buyout - which could have led to the creation of the greatest car manufacturer in the world - had failed in less that ten years. On May 14, 2007, the DaimlerChrysler company was already a thing of the past. Almost two years after the sale of Chrysler, a question remains: Why the merger failed? If we compare a merger to a marriage, we would say that they married the wrong persons. But how managers and executives from the two companies has gotten it so wrong?

I have chosen this very topic since I have prior work experiences both in Germany and in the United States. Even tough I do not claim to know everything about German and American culture, I have, at least, some background information and personal experiences that I can add in the analysis of this case study.

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TABLE OF CONTENT

Introduction   5

The  rational for a merger, the failure  5

Pre  -Merger Situation: Daimler  5

Pre  -Merger Situation: Chrysler  6

The  Meeting of Minds  7

A  Spectacular Failure  9

Analysis   11

The  rationale for the failure, issues related to cultural differences  11

Cultural  Issues Introduction  11

Cultural  Aspects of the Corporate Structure  12

Cultural  Aspects of the Leadership Style  13

Cultural  Aspects of the Company Values  15

Conclusion  Recommendations  17

Conclusion  of the case study, recommended course of action  17

Conclusion   17

Recommendations   18

References   19

ISEG-ISM  MBA  4

Pre-Merger Situation: Daimler 1

In 1926 was founded in Stuttgart, Germany Daimler-Benz AG, a manufacturer of automobiles, motor vehicles, and engines. It is already the result of a merger between Benz & Cie (founded by Karl Benz) and Daimler Motoren Gesellschaft (founded by Gottlieb Daimler and Wilhlem Maybach). Both companies agreed that, from the actual date of the merger on, each and every car produces in Daimler-Benz factory would use the brand name “Mercedes-Benz”, which was until then only the name of a series of cars from Daimler Motoren Gesellschaft. “Daimler-Benz” was not use as a brand name for the very simple reason that the name of Daimler as a brand name of automobiles had been sold by Daimler Motoren Gesellschaft in 1900 (when its co-founder, Gottlieb Daimler, died) for use by other companies.

The new entity rapidly made its name in motor sports as its cars were regarded as high end race automobiles.

During World War II, the company dramatically improved its technology by creating a series of aircraft, tank, and submarine engines.

Mercedes became then synonymous with high quality and luxury and the company Daimler-Benz got successful with the European upper-class.

¹ Data retrieved from Daimler.com, “Videocast” and Wikipedia.org “Daimler-Benz”.

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Pre-Merger Situation: Chrysler

The roots of Chrysler Corporation goes back to 1925, when the American car manufacturer Maxwell Motor Company is reorganized into Chrysler Corporation by Walter P. Chrysler (“A brief look at Walter P. Chrysler”, WPC News). Walter Chrysler launched its first car with the name “Chrysler” tagged on it by designing it as a well-engineered automobile but at a fairly af-fordable price. Manufacturing well-engineered cars while keeping on cutting prices became Chrysler’s bottom line.

With brands like Dodge, Jeep, Plymouth, and - of course - Chrysler, the company was viewed as the one of the main cars provider for the American working and middle class, along with General Motors (GM) and Ford. With these two other American car manufacturer, Chrysler Corporation made up the “Big three” group: the three biggest automobile manufacturer in the United States (U.S.).

Headquartered in Auburn Hills, Michigan, the Corporation was - back in the mid-1990 s - nothingless than the most profitable car producer in the world (“The DaimlerChrysler Merger”, Tuck School of Business at Dartmouth, 2002, no. 1-0071). This number one position was then maintained by the increasing sales of trucks, vans, and large sedan cars in the United States. In 1997, the company even reached a peak in terms of market shares in the U.S., at an impressive figure of 23%.

Having said that, business has not exactly been a bed of roses for the Chrysler Corporation. Somewhere along the line, it had faced four times bankruptcy between World War II and 1990, and its boom-bust revenue flow pattern had earned it a “come-back kid” reputation (“The DaimlerChrysler Merger”, Tuck School of Business at Dartmouth, 2002, no. 1-0071).

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