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Daimler chrysler merger

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Daimler chrysler merger

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Daimler chrysler merger

  1. 1. A Marriage Made in Hell
  2. 2. Merger• Result of an agreement between two companies to join their operations together.• Some key issues in mergers follow. Communication: Power and Culture: Operations: Grapevine conflict: Cultural fit. Processes win-win situation.
  3. 3. Studies of M & A integration report 60-75% fail (Source: KPMG, 2008)Cultural and human resource issues are at least equal in importance to financial factors in making a deal work (The Conference Board, 2001) E.g., Employees in firms that are acquired or merged report lower overall job satisfaction, lower trust in management, and diminished sense of job security (Gantz-Wiley Research, 2004)
  4. 4. • Founded in the year 1886 by Gottlieb Daimler and Carl Benz.• 125 years later, in anniversary year 2011, Daimler AG is one of the world’s most successful automotive companies. • With its divisions Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses and Daimler Financial Services. • The Daimler Group is one of the biggest producers of premium cars and the world’s biggest manufacturer of commercial vehicles with a global reach. • Daimler Financial Services provides its customers with a full range of automotive financial services including financing, leasing, insurance and fleet management.
  5. 5. • With the resources, technology and worldwide distribution network required to compete on a global scale, the alliance builds on Chrysler Group‟s culture of innovation, first established by Walter P. Chrysler in 1925, and Fiat‟s complementary technology that dates back to its founding in 1899.• Chrysler Group produces Chrysler, Jeep, Dodge, Ram, SRT, Fiat and Mopar. • Chrysler Group‟s product lineup features some of the worlds most recognizable vehicles, including the Chrysler 300, Jeep Wrangler, Dodge Challenger and Ram 1500. • Fiat contributes world-class technology, platforms and powertrains for small- and medium- size cars, allowing Chrysler Group to offer an expanded product line including environmentally friendly vehicles.
  6. 6. • On Nov. 12, 1998, Co. completed a business combination agreement with Chrysler Corporation.• The $75 billion industrial merger creates Daimler-Chrysler AG, an international transportation and services company that ranks as the worlds third largest automobile company based on 1997 revenues.• The enterprise will have operational headquarters in Stuttgart (Germany) and Auburn Hills, MI (USA).• “The Deal of the Century” Automotive Industries, June 1998
  7. 7. The Merger Was Welcomed by Auto Analysts and Consumers The world’s third largest auto manufacturer (GM 1st, Ford 2nd) Over $154 billion revenue, over $5.6 profit. Mercedes-Benz ranked as the most visible luxury brand. Chrysler’s success in low-end/sub- compact cars and trucks .
  8. 8. Daimler-Benz• Mercedes is the most popular luxury brand• A strong dealer network• Ranked #17 globallyChrysler Corporation• Low-end/sub-compact cars and trucks• Big auto manufacturer in North America• Mini-vans, Jeep and Dodge trucks• Ranked #25 globally
  9. 9. • Chryslers primary reason for teaming with Daimler-Benz is to extend its international reach• The goal of the merger : – Expected huge savings by combining purchasing and other operations – Reduce total research and development costs
  10. 10. Marriages Not Always Made in Heaven
  11. 11. • Daimler Management processes of planning, organizing and controlling. More conservative, efficient and safe.• Chrysler Setting goals, directing and monitoring implementation. Known as the risk-taking underdog● Cultural challenges ▬ Differences in working styles, leadership approach ▬ National culture differences ▬ Behavioural differences
  12. 12. • Daimler The driving image and experience associated with the highest quality available in the market• Chrysler Attractive, eye-catching design at a very competitive price
  13. 13. • Daimler Emphasis on engineering, design, quality and after sales service• Chrysler High volume, low cost manufacturing and distribution
  14. 14. ▬ Key members of management team leaving▬ Employee moral and motivation▬ Retention of key staff▬ Consultation with staff and representative bodies
  15. 15. Others issues● Daimler controlling 57%, in what was perceived to be a „merger of equals‟. Though strategically, the merger made good business sense. But contrasting cultures and management styles hindered the realization of the synergies.● Daimler-Benz attempted to run Chrysler USA operations in the same way as it would run its German operations.● Daimler-Benz was characterized by methodical decision-making. On the other hand, the US based Chrysler encouraged creativity.● While Chrysler represented American adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more traditional respect for hierarchy and centralized decision-making.● Three years later DaimlerChryslers market capitalization stood at $44 billion, roughly equal to the value of Daimler-Benz before the merger13. Chrysler Groups share value has declined by one-third relative to pre-merger values.
  16. 16. Importance of company culture integration.Importance of a clear and correct target.Importance of customers and demands.Importance of the association between theories andpracticeImportance of corporation especially the topexecutivesImportance of knowing the market and the partner
  17. 17. ● Compelling business reasons need to drive mergers and acquisitions● People‟s concerns matter, addressing them is as important as other factors in M & A activity● Meaningful involvement in the execution of the change has the most impact on employee cooperation and commitment● Continually clarify direction, and communicate extensively, candidly, and on ongoing basis● Treat people fairly, and design systems and processes that can flex with the needs of the organization● OB practitioners have a clear role in guiding and supporting change processes and change leaders in M & A activitiesThese pitfalls of mergers and acquisitions challenge todays leaders to a newstandard of managing change. The strategy is clear - accelerate, concentrate,adapt, and in the case of international M&As, consider cultural differences. Thehuman and cultural issues that separate the 17% from the 83% are not aboutsome abstract values or the "soft stuff", but the concrete reality of productivity,economic value and sustained growth.
  18. 18. http://oica.net/category/production-statistics/“Organisation Internationale des Constructeurs d’Automobiles” (OICA).Date Source: KPMG

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