In 1998 Daimler-Benz and the Chrysler Corporation tied the
knot. The newly created DaimlerChrysler [DCX] conglomerate was touted in the
business world as a merger of equals with both companies retaining their unique
and distinct identities. Soon after the merger the honeymoon period abruptly
ended and the rancor began. Diametrically opposite management and cultural
differences contributed to deep divisions which nearly scuttled the new
relationship. Today, things are much different than they were in 1998; however
it remains to be seen whether the long term partnership between the German and
American automakers will outlast the deep, mutual distrust that prevailed for
so many years.
A changing global automobile market during the final decade
of the 20th century signaled the end of small, independent automakers. Although
fairly large in size, the Chrysler Corporation, which nearly vanished in the
early 1980s, was once again nearing a crisis point: a rapidly changing market
meant that large amounts of cash would be needed to keep their product line up
to date as well as to take their product to emerging and lucrative new markets.
Unlike in the early 1980s when the US federal government stepped in with much
needed cash, no government suitor was expected this time around. For Chrysler,
the long term strategy strongly suggested that the automaker would have to be
acquired in order to survive. In stepped Daimler-Benz.
At first, the merger was hailed as the deal of the century.
The combined automakers, roughly the same size, quickly became the fifth
largest automaker in the world. Combining German engineering – Mercedes being
the principle business – and North American marketing – the Jeep line and the
Chrysler minivans being the biggest draw – many envisioned that the new company
would quickly capture a bigger slice of the global market. Unfortunately, the
dream was nearly scuttled and for the following reasons:
An American president of the Chrysler Group, Jim Holden, was
replaced by a German appointee, Dieter Zetsche. This change occurred as
Chrysler was experiencing difficulty in the marketplace; additional senior
American personnel had also left and were replaced by German executives too.
Some felt that the Germans were imposing their will on the Americans.
Billionaire shareholder Kirk Kerkorian who owned 36 million
shares of Chrysler before the merger and now held significant number of shares
of DCX stock, filed suit in 2000 alleging that certain Daimler-Benz officials
has committed "fraud and deceit" in orchestrating the merger.
Adding fuel to the fire was the closing out of the Plymouth
brand. Already suspicious of German intentions and knowing full well that the
"merger of equals" was, in fact, an acquisition of Chrysler by
Daimler-Benz, the ending of the Plymouth brand escalated fears that the
Chrysler Group would fade into the background.
Fortunately, time has eased some of the friction and the
Chrysler Group [defined as the part of DaimlerChrysler that was at one time the
Chrysler Corporation] has benefited from the merger in several ways, including:
New Mercedes inspired products. The Chrysler Crossfire was
the first of several new Mercedes inspired products to find their way into the
Chrysler Group. Made in Germany, the Crossfire is essentially a rebadged
Mercedes roadster, a model that the top of the line Chrysler division never
had.
Strengthening of the Dodge name. Already a decent performer,
the Dodge division has received several Mercedes M class inspired models
including the Magnum and the Charger. The Viper has been redone, the Ram trucks
updated, and the Neon is in the process of being replaced. Dodge market share
is increasing even in the face of strong foreign competition.
Fresh blood for Jeep. An all new 7 passenger Commander has
hit the streets and additional products are being planned.
Likely, Mercedes would have survived without a merger, while
Chrysler would not have. Overcoming strong cultural differences – German
authoritarian vs. American creativity – has kept the company afloat. Some are
crediting Zetsche’s understanding of the American company and culture with
easing tensions, thus allowing the companies to benefit from what they have in
common versus their differences.
Certainly, the rancor that existed just a few years ago
seems to have eased. For DCX to survive and grow a mutual trust and respect of
German and American cultural differences and business practices is necessary.
Without both, renewed hostilities will surface and potentially scuttle what is
still perceived by many as to be a fragile business relationship.
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