A Merger of Equal

A Marriage Made In Heaven

An Incompatible Marriage

The Perfect Union

Deal of The Century

The German Aggression…

BACKGROUND

Daimler-Benz AG founded in 1926 by Gottlieb Daimler and Carl Benz.

Business Divisions: Mercedes-Benz Cars, Daimler Trucks, Daimler Financial Services, Daimler Buses, Mercedes-Benz Vans

Today is the 2nd of the Big Three European Automakers (Volkswagen, Daimler AG, Renault

BACKGROUNDAll American

Background of Chrysler

Founded by Walter P. Chrysler on June 6, 1925.

Business Divisions: Chrysler, Dodge, ENVI, Jeep, Global Electric Motorcars (GEMCAR), Mopar, Chrysler Financial.

In 1928, Acquisition of the Dodge Brothers firm made Chrysler the third of Detroit’s “Big Three” (GM, Ford, Chrysler) automakers overnight.

Source: http://www.chryslerllc.com/en/about_us/our_history/

The MergerHow it all happened…

Motives for the Merger

To leverage on each other’s strengths.

To exploit new markets (US for Daimler and Europe for Chrysler).

Improving shareholder’s return.

Reducing the overall effective global competition.

Daimler's view to increase its market capitalization, revenues and earnings.

Purchasing, distribution, Research & Development.

Following the alliance…

1998

On May 7th, 1998, Bob Eaton announced that Chrysler would merge with Daimler-Benz through a $37 billion stock-swap deal, the largest trans-Atlantic merger ever.

Daimler-Benz CEO Jürgen Schrempp hailed the union as "a merger of equals.”

When he rang the bell at the New York Stock Exchange to inaugurate trading of the new stock, DCX, Eaton predicted, "Within five years, we'll be among the Big Three automotive companies in the world

1999

"The first full year of DaimlerChrysler had been a great one.

Their sales revenues for 1999 are up about 12 %. They sold 3 .2 million Chrysler, Dodge, Plymouth, and Jeep products - more than any other year history.

They also sold more than a million Mercedes-Benz passenger cars, and 550,000 commercial vehicles - also a record."

Situation after 2 years..

DaimlerChrysler's US arm stumble.

Revenue decrease of 6% from 2000.

Jurgen Schrempp was replaced by Dieter Zetsche of Chrysler leading to mismanagement.

Chrysler division suffered a large financial loss of 1.5 billion Euros and had plans to lay off over 13,000 jobs and closure of six plants.

REASONS FOR FAILURE

“How do you pronounce the name

of a German-American

automaker?”

Daimler. Chrysler is silent.

--DC headquarters joke Auburn Hills, MI

1. Cultural Clash

DaimlerChrysler did provide cultural workshops for employees and had post-merger integration team.

During the deal making process, meeting of the minds was met at senior management level.

However, there are several components causing this clash.

Contd..

Corporate structure Corporate governance and lifestyle Purchasing distribution and sales Values Customer proposition

““Mercedes was universally perceived as the Mercedes was universally perceived as the fancy, special brand, while Chrysler, Dodge, fancy, special brand, while Chrysler, Dodge, Plymouth and Jeep were the poorer, blue Plymouth and Jeep were the poorer, blue collar relations”collar relations”

James Holden, President of Chrysler --From September 1999

to November 2000

2. Mismanagemen

t Failure to inform all stakeholders

accurately about the terms of the mergers.

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.

This caused “Deep Mutual Distrust”.

3.Communication challenges

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?

DaimlerChrysler’s communication strategy was not effective enough to meet this challenge.

Less than 2 years, it had lost the confidence of the media and credibility it had with US management staff and shareholders.

Soon DaimlerChrysler was referred to as acquisition rather than merger.

CURRENT SITUATION

The Divorce May 2007, a private equity firm Cerberus Capital

Management LP is buying 80.1 percent of Chrysler, for $7.4 billion.

Far from the $38 billion Daimler spent to acquire Chrysler back in 1998.

Not all money goes to DaimlerChrysler, the money actually goes to paying off Chrysler's outstanding loans, ensuring the new Chrysler Holding company begins life debt-free.

Today Daimler AG is the 2nd of the Big Three European Automakers (Volkswagen, Daimler AG, Renault)

Just A Plain Daimler -- Back to Daimler

AG

THANK YOU

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