Daimler chrysler ccm exam_40099


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Cross-cultural analysis of the failure of DaimlerChrysler's merger.

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Daimler chrysler ccm exam_40099

  1. 1. Case: Daimler Chrysler <br />a.k.a. in M&A hell<br />Eleni Miliou<br />40099<br />SSE, March 2011<br />
  2. 2. Agenda<br /> History <br /> The merger<br /> Outcome <br /> Cultural differences analysis<br />Possible solutions<br /> Rationale for the chosen alternative<br /> Implementation <br />
  3. 3. Daimler Benz<br />Europe’s largest industrial company with 300,000 employees<br />Operations in:<br />Directly Managed Businesses (Rail, Automotive Electronics, Diesel engines)<br /> Passenger Cars<br /> Commercial Vehicles <br /> Aerospace <br /> Services<br />
  4. 4. First patented Benz-motorized vehicle, 1886.<br />The world’s first truck built in 1986 by Benz and Maybach.<br />
  5. 5. Chrysler<br /> US-based company<br />Founded in 1925<br />HQ in Detroit<br />Operations in:<br />Cars<br />Minivans<br /> Sport-utility vehicles<br /> Trucks<br />“ We produce cars and trucks that people will want<br /> to buy, will enjoy driving and will want to buy again. ”<br />
  6. 6. Walter Chrysler<br />“Chrysler Six” , 1924.<br />Chrysler K310<br />
  7. 7. The merger<br /> In 1998, the two automotive giants decided to merge<br />They described the $38 billion deal as a “merger of equals”<br /> The largest industrial merger ever<br />“ Today we are creating the world’s leading automotive company for the 21st century. ” <br />Jürgen Schrempp, Daimler-Benz Chairman<br />
  8. 8. Reasons<br /> Daimler is able to enter the US market and add more low-end cars to its assortment<br />Chrysler gets access to Europe<br /> Lower costs and higher productivity<br /> Exchange of technology<br /> Minimum overlap in markets and customers<br /> The goal: to create a larger global enterprise to compete in the biggest markets of the world<br />
  9. 9. Outcome<br /> Falling sales and share price as well as huge losses<br /> Synergies not working out as expected <br />DC’s market cap was almost equal to Daimler’s before the merger <br />In 2007 the deal was called off and Chrysler was sold to Cerberus Capital Management <br /> Daimler also paid $810 million for debt repayment of DaimlerChrysler<br />
  10. 10. Why did the merger fail?<br />Cultural Differences<br /> Diametrically opposite management thinking<br />Aplentymismanagement<br /> Lack of governance<br />“ The Merger of Equals statement was necessary to earn the support of Chrysler's workers and the American public, but it was never reality. ” <br />Jürgen Schrempp, DaimlerChrysler CEO<br />
  11. 11. Contrasting Values<br />Daimler<br />Chrysler<br /><ul><li>Quality-focus
  12. 12. Authoritarian
  13. 13. Bureaucratic
  14. 14. Hierarchical
  15. 15. Disciplined
  16. 16. Formal and structured decision-making
  17. 17. “Quality at any cost”
  18. 18. Cost-effective
  19. 19. Creative
  20. 20. Dynamic and informal
  21. 21. Pioneer
  22. 22. Fast and lean decision-making
  23. 23. “Bold and risk-taking underdog”</li></li></ul><li>Inability to Manage Cross-Culturally<br /> Strong cultures and language barriers (US vs. DE)<br /> Both companies had different culture and values and neither of them was willing to change<br /> Culture clash eroded the anticipated synergy savings<br /> Incompatible brand portfolios<br />
  24. 24. Possible Solutions<br />HumanDue Diligence<br />Carefully orchestrated and executed management<br /> Frequent and effective communication<br />Honesty strategy: ‘reveal your true intentions’<br /> Equality and Fair-Play<br />“- How do you pronounce the name of a German-American automaker?<br /> -Daimler. Chrysler is silent.” – DaimlerChrysler Headquarters joke <br />
  25. 25. Human Due Diligence<br />“Understanding the culture of an organization and the roles, capabilities, and attitudes of its people.”<br />The first and most crucial step towards a successful merger<br /> A proper estimation has to be done before any management techniques can prove successful<br /> Pro-active merger management<br />The only solution to identify diametrical, non-compatible cultures and avoid costly mistakes<br />Literature: Harding, D., Rouse, T. (2007). “Human Due Diligence”, HBR. <br />
  26. 26. Relevance to DaimlerChrysler<br /> Uncover capability gaps, points of friction, and differences in decision making<br />Make the right people decisions (who stays, who goes, who runs the combined business)<br />Decide whether to embrace or kill the deal and determine the monetary value of it<br />“ Human Due Diligence is every bit as important as financial due diligence. Ultimately, every deal succeeds or fails based on the collective efforts of the individuals who make it up.” – David Harding<br />
  27. 27. Theoretical Framework<br />Source: Harding, D., Rouse, T. (2007). “Human Due Diligence”, HBR. <br />
  28. 28. Implementation<br />Source: Harding, D., Rouse, T. (2007). “Human Due Diligence”, HBR. <br />
  29. 29. Possible hindrances<br /> If Daimler was clear about its intentions to acquire, Chrysler might have denied the deal<br />If Human Due Diligence had been done, the merger would potentially not have taken place at all<br />Even if Chrysler’s management agrees with the acquisition, staff may resist<br />
  30. 30. Conclusion<br /> Human Due Diligence is the most appropriate first step to solve the problems of the DaimlerChrysler case<br />Following, a combination of all suggested alternatives would be ideal<br />Lessons learnt for all M&A candidates: <br /><ul><li>do your homework
  31. 31. never-ever underestimate the importance of people</li></li></ul><li>Thank you for your attention!<br />