Daimler Chrysler , M&A study - SPJCM

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A presentation on the secondary study done by students of SP Jain center of management - Singapore & Dubai on the Daimler Chrysler partnership. - Jan 2008

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Daimler Chrysler , M&A study - SPJCM

  1. 1. Daimler-Chrysler A Match made in Heaven goes through HELL!!
  2. 2. About Daimler-Benz  Europe’s Largest Industrial Company  Employs 300,000 people  Operations in  Passenger Cars  Commercial Vehicles  Aerospace  Services  Directly Managed Businesses (Rail, Automotive Electronics and Diesel Engines)
  3. 3. About Chrysler  US Based Company  Operations in  Cars  Minivans  Sport-utility vehicles  Trucks  “We produce cars and trucks that people will want to buy, will enjoy driving and will want to buy again”
  4. 4. Why the Merger?  For Chrysler- Merger or Perish  For Daimler-Benz- The Perfect Storm  Daimler not able to take advantage of the booming US Economy  High costs for Daimler  Create a much larger globally based enterprise to compete in major markets of the world
  5. 5. The Deal Total Shareholding-  Announced-6th of May Daimler Chrysler 1998  Merger of Equals  Market Cap -US $92 Daimler Billion 43% Benz  Stock-swap Deal 57% Chrysler
  6. 6. Highlights of the Deal  Merger of Equals  Largest Industrial Merger ever  Horizontal Merger  DaimlerChrysler- World Leader in Transportation  Fifth Largest Company  World class products and brands complement each other  No plant closures or lay- offs planned
  7. 7. Synergies  World Leader in Transportation  Revenue Enhancement  Minimum overlap in Markets and Customers  Complete Spectrum of Products  Lower Costs and Higher Productivity  Cheaper Labor  Exchange of Technology  Higher Bargaining Power
  8. 8. Why did the Merger Fail?
  9. 9. Diametrically opposite management thinking  Millions spent on post-merger cultural sensitivity workshops  Rifts in business practice remained intact  Workshops didn’t help in changing management sentiment  Authoritative Germans vs. Creative Americans  German replaces an American as Chrysler’s president
  10. 10. Mismanagement Galore! quot;The Merger of Equals statement was necessary in order to earn the support of Chrysler's workers and the American public, but it was never reality” - Juergen Schrempp (DaimlerChrysler CEO )
  11. 11. Lack of governance  Juergen Schrempp and Bob Eaton did not follow coordinated course of action during transition phase  Low level contact between the two top level management guys  The American dynamism faded under subtle German pressure  Chrysler started drifting into no man’s land  It bled cash for almost an year, owing to mismanagement
  12. 12. Cultural Differences  The merger can be described as a “marrying up/marrying down” phenomenon  Employee bias was rampant in the merged organization  Chrysler’s market share in Europe, before and after merger – 2% !!  Chrysler and Daimler-Benz's brand images were founded upon diametrically opposite premises  Brand bias added to the woes of the company
  13. 13. More problems  Daimler relied heavily on quality and Chrysler inclined towards being cost-effective  Allegations of “fraud and deceit” on former Daimler executives  Adding fuel to the fire was the closing out of Chrysler’s Plymouth brand
  14. 14. Time to Call it off  Falling share price – Easy target for PE firms  Falling sales and huge losses owing to volatile US auto industry  Synergies not working out to be as expected  Chrysler hell bent on producing “big” cars  DaimlerChrysler’s market cap in the recent years was almost equal to what Daimler’s was before the merger !!
  15. 15. Time to Call it off contd… •In August 2007 the deal was finally called off •Chrysler was sold to Cerberus Capital Management •Daimler AG received $8.9 billion from the PE group •Cerberus got 80.1% stake in Chrysler •Daimler also paid $810 million for debt repayment of DaimlerChrysler
  16. 16. Thank You Compiled by Students of SP Jain Center of Management – Singapore / Dubai, data from secondary sources only. Rohit Gadia Saurabh Chube Sunitha Sureshbabu Viraj Parekh

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