Daimler Chrysler: Lessons in post-merger integration

Résumé du document

Professor Herbert Paul and student Myriam Tamim prepared this case, solely to provide material for class discussion. The authors do not intend to illustrate either the effective or ineffective handling of a management situation. The case was compiled from public sources. Abstract: The merger of Daimler–Benz with Chrysler Corporation created one of the largest car companies in the world. The case explores a number of issues in the post-merger integration process between Daimler-Benz and Chrysler and, to a lesser extent also Mitsubishi. Now, five years after the merger, questions can be asked about what worked and what did not work. In June 2003 the Chrysler website proudly announced the Chrysler Crossfire – “Dreamed in America. Drafted in Germany. Infused with passionate American design and Precision German engineering. Chrysler Crossfire is a rolling sculpture that moves the body and stirs the soul.” Advertising for the new sports coupe boldly tries to leverage Chrylser's sisterhood with Mercedes-Benz. Chrysler hopes that linking itself with the Mercedes-Benz luxury brand will boost its dented quality image and gain it prestige. The design was hatched at Chrysler's design studios in the U.S., but almost 40 % of the car is lifted directly from the Mercedes-Benz SLK, including suspension, axles and engine.

Extraits

[...] DaimlerChrysler agreed to acquire a stake in Mitsubishi Motor Corporation. This deal should help to strengthen Mitsubishi's market position in Europe and DaimlerChrysler's position in Asia the arguments sound familiar! There were additional incentives for the alliance: Mitsubishi should benefit from economies of scale by cooperating with DaimlerChrysler and here especially with Chrysler. On the other hand, DaimlerChrysler saw Mitsubishi as an ideal partner to expand its smart brand in the global small car segment. Again three months later, DaimlerChrysler signed a letter of intent with South Korean Hyundai Motor Company to acquire a stake. [...]

[...] III, the Germans rescue Chrysler?” Fortune, April p Jones, T., chief vows to put spark back in Chrysler,” Los Angeles Times, Dec p. C1 Schmitt, J., Scholtys, F., „Schwere Manager Magazin, 7/2001, p DaimlerChrysler Investor Relations Release, April By mid-year 2001 o Workforce reduction of 12.000 employees o Launch of Jeep Liberty By year-end 2001 o Total workforce reduction of 19.300 employees o Reduction in material cost by more than o Major plant adjustments (e.g. elimination of shifts and change of line speed) including closure of Toluca transmission plant o Launch of the new Dodge Ram o Operating loss in the range of Euro 2.2 2.6 billion By year-end 2002 o Launch of the new Dodge Viper o Further plant cost reductions and additional workforce reduction of 4.200 employees o Break-even for the full year By year-end 2003 o Achieving total workforce reduction of 26,000 employees o Achieving the full reduction in material cost compared to 2000 o Launch of the new Dodge Durango o Operating Profit of more than Euro 2 billion a. [...]

[...] The key to success, Daimler-Benz concluded, lay less in the price paid than in strategic fit and post-merger integration. Jürgen Schrempp was very much aware of these issues and stressed clear and tough decision-making during the integration process. He commented on the ‘deadly wish for harmony' when putting two companies together. put two companies together, you have two general councils, two internal auditors, you have two communication chiefs, etc., etc., etc. What guys who had problems did was say, ‘Well we come together, we are all one family, we love each other, we kiss each other.' And we promised ourselves, not that we were entirely successful in doing it, but we promised ourselves, let's put the unpopular issues on the table right from the start. [...]

[...] If you come together, and you say . 'let's just cool the water for the next months, we're not changing anything. Let people be comfortable.' Totally wrong! You know they actually expect changes. However, if you don't change anything substantially in the first months, they get into what I call a static position . The resistance to change once they feel comfortable again is so much greater than if you change during the time that they expect changes anyway. The (other) issue that was really important was speed. [...]

[...] A major board room drama took place inside DaimlerChrysler AG in September 1999. The company announced that its Management Board would be reduced to 12 members (see Figure 5). Just before the Board changes Eaton decided to fire his designated successor Thomas Stallkamp. Chrysler lost its change agent and a very successful top executive. Schrempp and Eaton decided to replace Stallkamp with James Holden, who they believed was easier to handle. Holden had been responsible for the North American sales and marketing activities. [...]