"Neither will survive alone, but it is a reluctant union!"
The Daimler-Benz merger with Chrysler is one of the most well-known international mergers in the world - not because it was successful, but because it failed as one company. What was the reason for this? The main one is that they ignored the cultural differences within the company which meant that there was no way it would work even if they managed to improve all other aspects. People have a large number of questions regarding this - why would they do it? What were they trying to achieve? How did they reach the $92bn figure as a settlement?
The structure of the company is most likely to change and this change should be made sooner than later. Employees should also be made aware of the possible changes as well. Although they declared that the Daimler Chrysler merger would be a merger of equals a lot of people were aware of the fact that there was no possibility of having two leaders. A lot of employees felt like it was a takeover rather than a merger so how was this an equal merger? Staff from Chrysler were worried because they were told that Eaton and Schrempp would be co-chairman for three years and then Eaton would retire. Even this plan failed because Eaton ended up leaving the company a year earlier than originally planned.
Culture played the biggest part in the failure of this merger. Employees were just put together but maybe team building exercises or such schemes should have been introduced to make the merger easier for them. Americans and Germans came from different cultural backgrounds so you cannot put them into one room and expect them to get along just like that. From personal experience, one culture would have to give things up at least partially to get along with the other.
Another issue that they had to face with wast that they were being excluded from the top S&P 500 American based companies in the Wall Street index because they were originally based in Germany. This resulted in investors pulling out overnight and stock fell by 10% and 8% respectively for Chrysler and Daimler Benz. This was not an issue which was discussed deeply but I believe that it should have been. It is impossible to be a German and an American company at the same time.
Most decisions were made in Germany and they had started to slowly take control of the company and employees and the Chrysler employees were aware that they would be facing a lot of changes after that.
It was a known fact for most people that although two men announced the news together to the press, only one of them would actually take the company into the 21st century. At the end of the day, I believe that if a company is in trouble, they should just find the best person to fix the problem - whether they are German, American or any other nationality, it really should not matter!
What do you think? Let me know in comments below!
Let me start with the price. $92bn is a lot. It is the largest industrial merger in history and this deal rocked the markets! All the meetings were held in secret and in different locations. Only a limited number of people within the companies were even aware of it. In March 18, 1998, the price had to be determines. The CEOs met to discuss this. How many shares in Daimler Benz would be offered for one Chrysler share? Bob Eaton - the CEO of Chrysler - had a very specific ratio that he wanted to follow.He claimed that he wanted 28% more than what shareholders are worth because he could not sell the idea of a merger to the shareholders otherwise. By the end of the meeting, they came to the conclusion that the settlement would be at $92bn.
Mergers and acquisitions have started becoming more and more popular in the recent years. Why are people spending shareholder's money to buy another company? In my opinion, the main reason for this is synergies - if two companies are merging, the combined value should be greater than the sum of the two companies separately, otherwise I do not see the point for it. However, you cannot just join two companies together and expect everything to work efficiently without doing anything about it.
The structure of the company is most likely to change and this change should be made sooner than later. Employees should also be made aware of the possible changes as well. Although they declared that the Daimler Chrysler merger would be a merger of equals a lot of people were aware of the fact that there was no possibility of having two leaders. A lot of employees felt like it was a takeover rather than a merger so how was this an equal merger? Staff from Chrysler were worried because they were told that Eaton and Schrempp would be co-chairman for three years and then Eaton would retire. Even this plan failed because Eaton ended up leaving the company a year earlier than originally planned.
"Mergers are never mergers! Either Eaton or Schrempp was going to be the leader!"
Another reason why companies might merge is to increase market power. With this merger, the company was exposed to both German and American markets and they could also save on tax purposes as well.An issue that occurred due to this was that people started referring to executives as German or American executives. This was wrong from the start. They should have been referred to as Daimler Chrysler executives. This would have shown the employees that they were serious about the merger and outsiders would have known that the company could also have global leadership in the car industry.
Culture played the biggest part in the failure of this merger. Employees were just put together but maybe team building exercises or such schemes should have been introduced to make the merger easier for them. Americans and Germans came from different cultural backgrounds so you cannot put them into one room and expect them to get along just like that. From personal experience, one culture would have to give things up at least partially to get along with the other.
Another issue that they had to face with wast that they were being excluded from the top S&P 500 American based companies in the Wall Street index because they were originally based in Germany. This resulted in investors pulling out overnight and stock fell by 10% and 8% respectively for Chrysler and Daimler Benz. This was not an issue which was discussed deeply but I believe that it should have been. It is impossible to be a German and an American company at the same time.
Most decisions were made in Germany and they had started to slowly take control of the company and employees and the Chrysler employees were aware that they would be facing a lot of changes after that.It was a known fact for most people that although two men announced the news together to the press, only one of them would actually take the company into the 21st century. At the end of the day, I believe that if a company is in trouble, they should just find the best person to fix the problem - whether they are German, American or any other nationality, it really should not matter!
What do you think? Let me know in comments below!
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