Pros And Cons Of Daimler And Chrysler Merger

It is widely known that a certain percentage of mergers don’t work. Those in favour of mergers and acquisitions will argue that the move will lead to cut costs and increased revenues. Simply put 1+1 = 3 sounds fantastic, but in reality, things can easily go wrong. The motivations behind what drives mergers can be flawed and efficiencies from economies of scale may prove elusive. In many cases, the problems associated with trying to make merged companies work are all too concrete. Cultural clashes and turf wars can prevent plans from reaching their full potential. Problems such as different systems and processes, dilution of the company 's brand, overestimation of synergies and little knowledge of the target firm 's business can all happen

Jurgen Schrempp, CEO of Daimler and Robert Eaton Chairman and CEO of Chrysler Corporation met to discuss the potential merger. The merged entity ranked third after GM and Ford, in the world in terms of revenues, market capitalization and earnings. In the first year the combined companies earned $155.3 billion and sold 4 million cars and trucks. Contrasting cultures and management styles hindered the realization of the synergies. Daimler tried to run Chrysler USA the same way it ran its German operations. The German operation had high uncertainty avoidance meaning they worked in a highly structured environment, whereas Chrysler USA encouraged creativity among their employees. Chrysler valued American adaptability and efficiency and equal empowerment. Daimler represented a more traditional structure of hierarchy and centralized decision making. Apart from the cultural issues there was also an issue with trust within the organizations, employees on both sides were reluctant to work with each other. During the initial stages of the merger, a larger number of Chrysler’s key executives either resigned or were replaced by Germans counterparts. Daimler tried to enforce their companies culture within Chrysler which didn’t inspire Chryslers employees with trust and raised issues with communication within the merged companies. Chrysler reported losses of $1.5 billion in 2006, then announced plans to lay off 13,000 employees in February 2007 and close a major assembly plant and reduce production at other plants in order to restore profitability by 2008. Daimler agreed to sell the Chrysler unit to Cerberus Capital Management in May 2007 for $6