The document summarizes the merger between Daimler-Benz and Chrysler in 1998 to form DaimlerChrysler. It describes the opportunities identified from the merger, including increased sales, new markets, cost reductions, and economies of scale. However, integrating the two dynamic companies from different cultures proved challenging. While initial synergies were realized, cultural issues impaired further integration efforts. Financial problems emerged by 2000 as synergies did not materialize and sales declined. The merger highlights the difficulties of integrating two large companies from different countries and cultures.

1. Ishpreet Singh – 12P139 Karan Jaidka – 12P141
Kshitij Agrawal – 12P142 Kshitij Ahuja – 12P143
Manav Gupta – 12P146 Vikas Jain – 12P178
Group 1 – Strategic Management – II
PGPM 2012-14

3.  May 1998: Daimler-Benz and Chrysler
announced that they would merge to create
DaimlerChrysler
 Opportunities were identified to increase
sales, create new markets, reduce
costs, realize economies of scale for the new
entity
 Short term synergies of about USD 1.4 billion
were seen
 Challenge foreseen: To integrate two
dynamic companies into one

4.  Formation of the “DreamTeam”
 Two-tiered board system
 Supervisory Board: responsible for appointments and
approval of major decisions
 Board of Management: responsible for executing
company strategy
 However, integration efforts were marred by
bickering between the Americans and the
Germans
 Differences in management
styles, processes, cultures and working styles caused
problems

5.  DaimlerChrysler claimed to have successfully
completed the merger within 10 months itself
 Restructuring activities
 Board of Management reduced from 17 to 14
members (Two Chrysler executives removed)
 Creation of a separate Sales and Marketing Council
 Automotive business broken into 3 distinct brand
divisions
 Automotive Council formed to drive innovation and
sharing of knowledge and technologies
 The new structure sort of recreated the old
Chrysler corporation

6.  No synergies through platform amalgamation
 Industry volumes falling, introduction of fewer
products
 Initial increases in numbers were attributed to merger
synergies
 However, by 2000, stock prices were on the decline
 No more disclosure of information of merger
synergies (received badly by analysts)
 Financial problems
 Q3FY00 operating loss at USD 512 million
 EPS down by 75%, while GM’s EPS was up by 22%
 Expecting dwindling sales, 7 plants were made idle
 Share price hit an all-time low

7.  Phase 2 technology sharing efforts were
problematic
 Cultural issues were prevalent
 By the end of Q1FY01, losses touched USD
2.7 billion
 Cost cutting strategies were adopted
 19,500 employees and 1,000 contractual workers
fired in 2001
 Non-product spending cut by over 58%

8.  Easy part of the deal: Negotiations and signing
 Putting the deal together and making it work is
the hard part (Integration)
 Adequate due diligence of target companies is
of paramount importance
 Bringing together two different companies from
two different countries, different cultures
(corporate and real) is a humungous task
 Clear and specific post-merger strategy should
be in place even at the pre-merger stage
 Leadership effectiveness for better integration
is a must