In May, 1998, Daimler-Benz and Chrysler Corporation, two of the world’s leading car manufacturers, agreed to combine their businesses in what they claimed to be a “merger of equals.” The merger resulted in a large automobile company, ranked third in the world in terms of revenues, market capitalization and earnings, and fifth in the number of units (passenger-cars and commercial vehicles combined) sold. DCX generated revenues of $155.3 billion and sold 4 million cars and trucks in 1998. Schrempp and Eaton jointly led the merged entity, as co-chairmen and co-CEOs. DCX’s success depended on integrating two starkly different corporate cultures. Daimler-Benz was characterized by methodical decision-making while Chrysler encouraged creativity. Chrysler valued efficiency, empowerment, and fairly egalitarian relations among staff; whereas Daimler-Benz seemed to value respect for authority, bureaucratic precision, and centralized decision-making. These cultural differences soon became manifest in the daily activities of the company. Another key issue at DCX was the differences in pay structures between the two pre- merger entities. Germans disliked huge pay disparities and were unlikely to accept any steep revision of top management salaries. But American CEOs were rewarded handsomely: Eaton earned a total compensation of $10.9 million in 1997. Complications would arise if an American manager posted at Stuttgart1 ended up reporting to a German manager who was earning half his salary. Chrysler could cut pay only at the risk of losing its talented managers. Germans and Americans also had different working styles. The Germans were used to lengthy reports and extended discussions. On the other hand, the Americans performed little paperwork and liked to keep their meetings short. Americans favored fast-paced trial-and-error experimentation, whereas Germans drew up painstakingly detailed plans and implemented them precisely. In general, the Germans perceived the Americans as “chaotic” while the Americans felt that the Germans were stubborn “militarists.” Chrysler managers believed in spotting opportunities and going for them. However, post merger, they were trapped in the German style of planning, constantly being told what to do. Steve Harris, Chrysler’s former communications chief (who defected to General Motors) commented, “The Germans played literally by the book—theirs. You’d go into a meeting and have to turn to Volume 7, Section 42, page 597.” The Germans prided themselves on analytical research that produced a plan, while the Americans reached for the impossible and kept coming up with new ideas to achieve these “impossible” goals. Before the merger, Daimler-Benz was known for its top-down management approach. Chrysler, by contrast, seemed to be a humble collection of colorful consensus managers. DCX claimed that the merger process would be complete in twelve months. However, analysts felt that the authoritarian German management methods would prove foreign to the non-hierarchical style at Chrysler making the integration of the two cultures difficult.

1. Daimler-Benz and Chrysler Corporation, two of the world’s leading car manufacturers, merged recently. Describe briefly, the culture of Daimler-Benz? 2. Describe briefly, the culture of Chrysler corporation and give your opinion on what culture the merged entity should follow to succeed in competitive automobile industry?