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SWOT daimlerchyrsler


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SWOT daimlerchyrsler

  1. 1. A Merger of Equal A Marriage Made In Heaven An Incompatible Marriage The Perfect Union Deal of The Century
  2. 2. BACKGROUND England’s oldest marque
  3. 3. Background of Daimler <ul><li>Gottlieb Daimler , 1834-1900 </li></ul><ul><li>1889 – Developed engines with Wilhelm Maybach </li></ul><ul><li>1891 – Fredrick Simms Bought UK patent rights to Daimler’s engine </li></ul><ul><li>1893 – Formed a company called ‘The Daimler Motor Syndicate Ltd.’ </li></ul><ul><li>1924 – Merged with Karl Benz’s Benz & Cie to form Daimler-Benz. Built cars under the name Mercedes-Benz. </li></ul>Gottlieb Daimler
  4. 4. <ul><li>Core Competencies </li></ul><ul><ul><li>high-valued, technically advanced cars, and focuses on development of car engines </li></ul></ul><ul><li>Target Market </li></ul><ul><ul><li>Daimler is an up-market brand </li></ul></ul><ul><ul><li>The company targets a market niche with high-end users, that focus on the luxurious trait of Daimler </li></ul></ul><ul><li>Strategic Intent The company aims to achieve sustainable profitable growth through the development superior products, and customer-relevant technologies. </li></ul><ul><li>Source : =60037 </li></ul>
  5. 5. Daimler’s Company Profile <ul><li>Current Chairman: Dr . Dieter Zetsche </li></ul><ul><li>Business Divisions: Mercedes-Benz Cars, Daimler Trucks, Daimler Financial Services, Daimler Buses, Mercedes-Benz Vans </li></ul><ul><li>Total Revenues in 2007: EUR 99.4 billion </li></ul><ul><li>Total Sales in 2007: 2.1 million units </li></ul><ul><li>Today is the 2 nd of the Big Three European Automakers (Volkswagen, Daimler AG, Renault) </li></ul><ul><li>Brands: Mercedes - Benz, Smart, Maybach, AMG, Freightliner, Sterling, Western Star, Mitsubishi Fuso, Setra, Detroit Diesel, Thomas Built Buses, Orion </li></ul><ul><li>Source: </li></ul>
  6. 6. BACKGROUND All American
  7. 7. Background of Chrysler <ul><li>Founded by Walter P. Chrysler on June 6, 1925 </li></ul><ul><li>1924 – Launched Chrysler Six , designed to provide an advanced, well-engineered car, at an affordable price </li></ul><ul><li>1928 – Acquisition of the Dodge Brothers firm made Chrysler the third of Detroit’s “ Big Three ” (GM, Ford, Chrysler) automakers overnight </li></ul><ul><li>Source: </li></ul>
  8. 8. Background of Chrysler <ul><li>Core Competencies </li></ul><ul><ul><li>Well known for its product designs, process design, marketing </li></ul></ul><ul><li>Target Market </li></ul><ul><ul><li>Mass market </li></ul></ul>
  9. 9. Chrysler’s Company Profile <ul><li>Current Chairman and CEO: Robert Nardeli </li></ul><ul><li>Business Divisions: Chrysler, Dodge, ENVI, Jeep, Global Electric Motorcars (GEMCAR), Mopar, Chrysler Financial </li></ul><ul><li>Main Market: North America </li></ul><ul><ul><li>90% of sales, 2.1 million units produced annually </li></ul></ul><ul><li>Dealerships in US: 3,669 (as of 2007) </li></ul><ul><li>Chrysler i s considered today as the most successful Detroit automaker </li></ul>
  10. 10. The Merger How it all happened…
  11. 11. Motives for the Merger <ul><li>Daimler’s Motives </li></ul><ul><ul><li>Their goal to become a global player with interests outside its traditional West European base, led to its merger with the Chrysler Corporation. </li></ul></ul><ul><li>Chrysler’s Motives </li></ul><ul><ul><li>To gain competence in product technology and quality </li></ul></ul><ul><ul><li>To expand beyond the North American market </li></ul></ul><ul><li>In combining the two companies, you had the potential of gaining high volumes, participation in all segments, innovation, adaptability, and technology and quality excellence </li></ul><ul><li>Source: School of Economics and Management, Lund University </li></ul>
  13. 13. SWOT Analysis <ul><li>Strengths </li></ul><ul><li>Merger combined two strong companies . </li></ul><ul><li>Savings resulting from economies of scale . </li></ul><ul><li>Company does more than just autos . </li></ul><ul><li>Daimler has outstanding reputation . </li></ul><ul><li>Chrysler was a very cost - effective company . </li></ul><ul><li>A leader in innovation . </li></ul><ul><li>Record revenues and increasing market share . </li></ul><ul><li>Lack of capital constraints . </li></ul><ul><li>Strong existing product brands . </li></ul><ul><li>$47 billion allocated for research and development . </li></ul><ul><li>A wide array of corporate holdings . </li></ul><ul><li>Leader in Fortune Global 500 . </li></ul>
  14. 14. <ul><li>Weaknesses </li></ul><ul><li>Merger combined two different company cultures ( European and American ). </li></ul><ul><li>Harder to inspire vision and direction for this large global company . </li></ul><ul><li>Employees have been leaving at a high rate . </li></ul><ul><li>DaimlerChrysler brand is unknown and difficult to define . </li></ul><ul><li>Image campaign could distract from strong product brands . </li></ul><ul><li>DaimlerChrysler products do not bear the company name . </li></ul><ul><li>Company’s broad holdings are still seen as separate entities, not as parts of DaimlerChrysler . </li></ul>SWOT Analysis
  15. 15. <ul><li>Opportunities </li></ul><ul><li>Merged company should be able to expand markets, particularly into Asia . </li></ul><ul><li>Safety failures at Ford should open door for DaimlerChrysler . </li></ul><ul><li>Innovation will lead to new products on the market . </li></ul><ul><li>A hybrid car, which is very environmentally friendly, will be launched soon . </li></ul><ul><li>Creating a DaimlerChrysler corporate brand identity . </li></ul><ul><li>Over 68 percent of the company's profits come from automotive brands . </li></ul><ul><li>Can reach opinion leaders and existing customers with similar communication plans . </li></ul><ul><li>Innovative car ideas . </li></ul>SWOT Analysis
  16. 16. <ul><li>Threats </li></ul><ul><li>Has been an extended period of time without corporate communications . </li></ul><ul><li>Globally, the general population knows little about this corporate merger . </li></ul><ul><li>DaimlerChrysler does not yet have a corporate brand identity . </li></ul><ul><li>Over 68 percent of the company's profits come from automotive brands; this is a threat if the market takes a downturn . </li></ul><ul><li>Behind in the research and marketing of hybrid autos . </li></ul><ul><li>Size of company will demand a varied marketing program; a cookie - cutter approach will not work . </li></ul>SWOT Analysis
  17. 17. Alliance Design
  18. 18. Alliance with Other Companies <ul><li>CEO, Schrempp attempted to enter Asia by forming an alliance with Nissan but was turned down by board members. </li></ul><ul><li>Hyundai of South Korea in June 2000 </li></ul><ul><ul><li>DCX purchased 10 percent of Hyundai share in June of 2000 for $428 million , later increase its holding to 10.5% </li></ul></ul><ul><ul><li>S old share of Hyundai in 2004 for $912 Million </li></ul></ul>
  19. 19. <ul><li>Mitsubishi of Japan From March 2000- Nov 2005 </li></ul><ul><ul><li>Hold 34% of Mitsubishi equity stake (purchased for 2.1 Billion Euro) </li></ul></ul><ul><ul><li>Lasted 69 months </li></ul></ul><ul><ul><li>The deal was costly – it was a disaster!! </li></ul></ul><ul><ul><li>Mitsubishi was loss-making partner rather than good merger target. </li></ul></ul><ul><ul><li>Shortly after a sale of the final portion of share, Schrempp was forced to step down and replaced. </li></ul></ul>Alliance with Other Companies
  20. 20. Mitsubishi Performance
  21. 21. Following the alliance…
  22. 22. 1999 <ul><li>&quot;The first full year of DaimlerChrysler has been a great one. </li></ul><ul><li>Our sales revenues for 1999 are up about 12 %. We sold 3 .2 million Chrysler, Dodge, Plymouth, and Jeep products - more than any other year history. </li></ul><ul><li>We also sold more than a million Mercedes-Benz passenger cars, and 550,000 commercial vehicles - also a record.&quot; </li></ul>
  23. 23. 2000 <ul><li>2-years after merger, DaimlerChrysler's US arm stumble. </li></ul><ul><li>Chrysler US loss for 3rd Q at $530M-$550M </li></ul><ul><li>Problems: US exec flight due to German “intervention“, abandon of Jeep/Dodge Ram up styling, failure to deliver on cost savings </li></ul><ul><li>(unwelcome by US execs) Investments in Mitsubishi and Hyundai for &quot;global&quot; market projects </li></ul>
  24. 24. 2001-2002 <ul><li>Late 2000: Dr. Z, then head of Chrysler, proposed a massive reorganization of the US subsidiary: the closure of six plants and the loss of 26,000 jobs . </li></ul><ul><li>A poor performance in 2001 </li></ul><ul><li>DaimlerChrysler's revenues for 2002 ($148.15 billion) decreased 6% from 2000 </li></ul><ul><li>Chrysler cars generated a decreasing revenue, down 7% from 2000 and Chrysler accounts for 41.5% of company revenue </li></ul><ul><li>On the opposite, Mercedes Benz generated an increasing revenue of 9%, only accounted for 31% of the total revenue. </li></ul>
  25. 25. 2003-2005
  26. 26. After that… <ul><li>Late 2005: shareholders forced Jurgen Schrempp to step down as the chairman. After the Chrysler unit of DaimlerChrysler made a big loss in 3Q of 2005,. </li></ul><ul><li>Dr. Z, Dieter Zetsche, took over. </li></ul><ul><li>$1.5 billion loss for 2006 </li></ul><ul><li>DaimlerChrysler's operating profit in 2006 rose .3 billion euros from the previous year . </li></ul><ul><li>However, Chrysler division suffered a large financial loss of 1.5 billion euros and has plans to lay off over 13,000 jobs in the future. </li></ul>
  27. 27. 1. Stock Price shrank… Overall results Stock Price 1998-2002
  28. 28. Comparison Stock Price 2000-2005
  29. 29. 2. Chrysler Total Market Share Drop … Overall results
  30. 30. 3. Total Market Share Overall results 4. Net Operating Profit
  31. 31. Reasons for Failure “ How do you pronounce the name of a German-American automaker?” Daimler. Chrysler is silent. --DC headquarters joke Auburn Hills, MI
  32. 32. 1. Cultural Clash <ul><li>DaimlerChrysler did provide cultural workshops for employees and had post-merger integration team. </li></ul><ul><li>During the deal making process, meeting of the minds was met at senior management level. </li></ul><ul><li>However, there are several components causing this clash. </li></ul>
  33. 33. <ul><li>Daimler </li></ul><ul><li>--a conglomerate with 21 different business </li></ul><ul><ul><li>Hierarchical: tradition top-down management </li></ul></ul><ul><ul><li>Bureaucratic </li></ul></ul><ul><ul><li>Detailed decision making </li></ul></ul><ul><ul><li>Disciplined </li></ul></ul>1.1 Corporate Structure <ul><li>Chrysler </li></ul><ul><li>--highly centralized car and truck manufacturer </li></ul><ul><ul><li>Fast and lean decision making: allow mid-level employees to make decision </li></ul></ul><ul><ul><li>Relatively informal </li></ul></ul><ul><ul><li>Team-orientated </li></ul></ul><ul><ul><li>Success Driven </li></ul></ul>
  34. 34. 1.2 Corporate Culture <ul><li>Daimler </li></ul><ul><ul><li>Management processes of planning, organizing and controlling </li></ul></ul><ul><ul><li>More conservative, efficient, and safe </li></ul></ul><ul><ul><li>Formality, hierarchy </li></ul></ul><ul><ul><li>Well-structured decision making process </li></ul></ul><ul><ul><li>Beer brakes - smoke and alcohol in the workplace </li></ul></ul><ul><ul><li>Chrysler </li></ul></ul><ul><ul><li>Setting goals, directing and monitoring implementation </li></ul></ul><ul><ul><li>The risk-taking underdog </li></ul></ul><ul><ul><li>Innovative </li></ul></ul><ul><ul><li>Free -form discussion </li></ul></ul><ul><ul><li>Less formal but strict about issue like alcohol and smoking in the workplace </li></ul></ul>
  35. 35. <ul><li>Daimler </li></ul><ul><ul><li>Codetermination: equal representation of workers and supervisors </li></ul></ul><ul><ul><li>Union have much more power </li></ul></ul><ul><ul><li>Lesser salary but high expense budget </li></ul></ul><ul><li>Chrysler </li></ul><ul><ul><li>No codetermination </li></ul></ul><ul><ul><li>Toothless Union: struggle between union and management </li></ul></ul><ul><ul><li>Higher salary and bonus </li></ul></ul>1.2 cont. -- Corporate Governance and lifestyle
  36. 36. 1.3 Customer Proposition & Product development philosophies “ Mercedes was universally perceived as the fancy, special brand, while Chrysler, Dodge, Plymouth and Jeep were the poorer, blue collar relations” James Holden, President of Chrysler --From September 1999 to November 2000
  37. 37. <ul><li>Daimler – Quality At Any Cost </li></ul><ul><ul><li>The brand image and experience associated with the highest quality available in the market and uncompromising </li></ul></ul>1.3 Customer Proposition & Product development philosophies <ul><li>Chrysler – Price Targeted Vehicle </li></ul><ul><ul><li>Attractive, eye-catching design at a very competitive price, assertiveness, and risk-taking </li></ul></ul>
  38. 38. <ul><li>Daimler </li></ul><ul><ul><li>Use handful of close suppliers </li></ul></ul><ul><ul><li>Brand bias: Dodge Neon and Jeep Grand Cherokee were sidelined in favour of less cost-effective and troublesome Mercedes A-Class and M-Class SUV. </li></ul></ul><ul><li>Chrysler </li></ul><ul><ul><li>Several sources of suppliers </li></ul></ul><ul><ul><li>Chrysler’s European market penetration was affected from this brand bias </li></ul></ul>1.4 Purchasing, distribution and sales
  39. 39. <ul><li>Daimler </li></ul><ul><ul><li>Emphasis on engineering, design, quality, and after-sales service </li></ul></ul><ul><li>Chrysler </li></ul><ul><ul><li>High volume, low cost manufacturing, and distribution </li></ul></ul>1.5 Value s
  40. 40. 2. Mismanagement <ul><li>Failure to inform all stakeholders accurately about the terms of the mergers. </li></ul><ul><li>Oct 2000, Schrempp, Daimler CEO, confessed that it was never meant to be merger of equal – Chrysler was to be a subsidiary of Daimler-Benz. </li></ul><ul><li>This caused “Deep Mutual Distrust”. </li></ul>
  41. 41. “ Deep Mutual Distrust” <ul><li>Were the Germans at point of dominating? </li></ul><ul><ul><li>Schrempp’s public announcement in Germany </li></ul></ul><ul><ul><li>--This rather be an acquisition, not a merger. Employees’ and US buyers’ felt they were betrayed. </li></ul></ul><ul><ul><li>Unequal representation at the executive board </li></ul></ul><ul><ul><li>Closing out of Plymouth brand </li></ul></ul><ul><ul><li>Later on, almost all of Chrysler key executives and upper management personals were either left, resigned, or replaced by the German ones. </li></ul></ul>
  42. 42. <ul><ul><li>Late 2000, an American president of the Chrysler Group, Jim Holden, was replaced by a German appointee, Dieter Zetsche during the time when Chrysler experienced difficulty in the marketplace </li></ul></ul><ul><ul><li>Other American executives were either replace or left as well </li></ul></ul><ul><ul><li>-- Now the German was solely in charge of Chrysler. </li></ul></ul>“ Deep Mutual Distrust” cont.
  43. 43. Communication challenges <ul><li>No clear message and communication about answer to current problems and who is going to run the entity. The German? Will facilities of Chrysler have to close down? </li></ul><ul><li>DaimlerChrysler’s communication strategy was not effective enough to meet this challenge. </li></ul><ul><li>Less than 2 years, it had lost the confidence of the media and credibility it had with US management staff and shareholders. </li></ul><ul><li>Soon DaimlerChrysler was referred to as acquisition rather than merger. </li></ul>
  44. 44. 3. Changes in US Auto Industry <ul><li>Rapidly changing world market…large amounts of cash would be needed to keep product lines up to date as well as to take products to emerging and profitable new markets. </li></ul><ul><li>In US, the challenges from Japanese brands during 1998-2000 which Chrysler responded with little innovation and competitive price reduction. </li></ul>
  45. 45. Current Situation
  46. 46. The Divorce <ul><li>May 2007, a private equity firm Cerberus Capital Management LP is buying 80.1 percent of Chrysler, for $7.4 billion. </li></ul><ul><li>Far from the $38 billion Daimler spent to acquire Chrysler back in 1998. </li></ul><ul><li>Not all money goes to DaimlerChrysler, t he money actually goes to paying off Chrysler's outstanding loans, ensuring the new Chrysler Holding company begins life debt-free. </li></ul>
  47. 47. Just A Plain Daimler -- Back to Daimler AG
  48. 48. Chrysler LLC
  49. 49. Thank You For Your Attention