Daimler-Benz, Europe's largest industrial company, merged with Chrysler, a US-based automaker, in 1998 in a stock-swap deal valued at $92 billion. The merger aimed to create a globally competitive automaker by combining Daimler-Benz's operations in passenger cars, commercial vehicles, aerospace, and other areas with Chrysler's car, minivan, SUV, and truck businesses. However, cultural and management differences between the German and American companies proved difficult to reconcile, and the merger failed to achieve many of its intended synergies. In 2007, DaimlerChrysler sold Chrysler to Cerberus Capital Management for $7.4 billion, ending the troubled merger

1. Daimler-Chrysler
A Match made in Heaven goes through HELL!!

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. 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. 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. 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. 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. 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. Why did the Merger Fail?

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. 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. 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. 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. 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. 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. 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

17. 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