Daimler-Chrysler Merger: A Cultural Mismatch?

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Themes: Mergers Acquisition / Takeovers
Period : 1998-2001
Organization : Daimler Benz Chrysler Corporation
Pub Date : 2001
Countries : India, North America, Europe
Industry : Auto and Ancillaries

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Case Code : BSTR009
Case Length : 07 Pages
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Attempts to Bridge the Chasm

DCX took several initiatives to bring the two cultures closer. Press reports indicated that in Stuttgart, the more formal Germans were experimenting with casual dress. The Germans were also taking classes on cultural awareness. The Americans at DCX were encouraged to make more specific plans, while the Germans were urged to experiment more freely.

Analysts felt that there were many indications that the Americans and the Germans might come closer. The Americans were impressed by their German counterparts' skill with the English language (though they tried to cut down on slang to simplify speech when the Germans were in town). To reciprocate, many Americans were taking lessons in German. When the DCX stock began trading on November 17, 1998, German workers celebrated with American-style cheerleaders, a country-western band called The Hillbillies, doughnuts and corn on the cob. At a Detroit piano bar, the Americans were taken by surprise when they came to know that the Germans knew the lyrics of old rock-and-roll songs.

Daimler's Hegemony

In 2000, there was a management exodus at Chrysler headquarters in Detroit: two successive Chrysler presidents, James Holden (Holden) and Thomas Stallkamp (Stallkamp), both American, were fired. Holden was fired after only seven months in the position. Stallkamp replaced Holden and was forced to resign after only twelve months as CEO. Unreal as it might seem, two highly regarded Chrysler executives were fired from their CEO positions in the space of 19 months. Zatsche, the newly appointed CEO of Chrysler USA, was a Daimler executive and a close confidant of Schrempp. He, in turn, appointed Wolfgang Bernhard, another Daimler executive, as COO. Neither had any real exposure to the US marketplace. This turn of events demoralized Chrysler's workers. According to an employee, most of the workers were disgusted and frustrated because they felt they were being punished. The employees were expecting big layoffs, and were worried that the company would be sold out.

Analysts felt that after the merger Chrysler would no longer exist as an entity. In fact Chrysler was reduced to a mere operating division of DCX. The Daimler-Benz management presence permeated every important function at Chrysler USA. There was no Chrysler presence on the DCX supervisory board or the board of management. By the end of 2000, there were only 128,000 Chrysler employees still working in the US operations, all anxious and demoralized. Ex-Chrysler managers felt that Daimler-Benz was steadily leading Chrysler into a state of chaos.

Schrempp himself said that he never intended the merger be one of equals. He openly acknowledged that if Daimler-Benz's real intentions were publicly known before the merger, there would have been no deal. However, in a press interview, Schrempp largely retracted his statements by saying that if the strategy were to take over Chrysler, Daimler would never have included them in the name of the new corporate entity. Analysts felt that these contradictory statements had severely tarnished Schrempp's image, both in Germany and the US.

Given these chaotic circumstances, Chrysler reported a third quarter loss of $512 million for the period ending September 30, 2000; and its share value slipped below $40 from a high of $108 in January 1999.

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