DaimlerChrysler Post-Merger Integration

Posted by admin on February 21, 2018 in Articles

DaimlerChrysler Post-Merger Integration
“A merger of equals made in heaven”. Given the background and the situation of both companies by late ‘90s, was such a target only a dream or really feasible? Do you find among the 2 a major potential beneficiary of the merger process?
Chrysler:
Best practice for the U.S. car industry
Cost reduction program SCORE cut suppliers by half
Target costing allowed the company to significantly reduce R&D costs (500 USD vs 2000 USD Mercedes)
Lowest vertical integration and highest platform sharing among its brands
Most productive carmaker
Least diversified and even within the vehicle segment
Too much focused on the North American market.
Daimler Benz
premium profitability through restructuring efforts and a refocus on the automobile sector
High-quality luxury vehicles based on German engineering and technology
Huge global sales and dealership network
Highest costs in the industry resulting from inefficient production methods and processes and high labor costs.
Very complementary on paper:Daimler Benz
Chrysler
NAFTA sales
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Europe Sales
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Asia & LATAM
Collaboration opportunity (JV)
Passenger cars
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Minivans

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SUV

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Trucks

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Who is the major beneficiaryBoth companies rushed into the merger given the pressure from globalization.
The back-end merger is an unefficient way of merging in a production environment as it excludes all synergies resulting from economies of scope and scale.
Fundamental different viewpoints on strategy (productivity versus technology leadership)
Integration only among 300 top-leaders and through compensation
Tax-Benefits for both companies
Lack of cultural due-diligence destroyed employee engagement
Shareholders did not understand the investor story – Shift from U.S. investors towards European investors
In the end, both companies lost (market capitalization, investors, employee trust and credibility). This merger had the potential to…