daimler chrysler - a cultural mismatch
TRANSCRIPT
Daimler-Chrysler Merger
A Cultural Mismatch
About Chrysler Corporation
The company was founded by Walter Chrysler (1875–1940) on June 6, 1925.
The Chrysler was a 6-cylinder automobile, designed to provide customers with
an advanced, well-engineered car, but at a more affordable price than they
might expect.
The advanced engineering and testing that went into Chrysler Corporation
cars helped to push the company to the second-place position in U.S. sales by
1936.
About Daimler - Benz
In 1885 Daimler, together with Maybach began work on the first engines that
were designed specifically for use in motor vehicles.
This German firm, initially operating at Cannstatt near Stuttgart, was the
origin of the business variously known as Daimler Motoren Gesellschaft from
1890 to 1926, and then Daimler-Benz from 1926 to 1998.
Daimler Benz was founded in 1926. An Agreement of Mutual Interest - was
signed on 1 May 1924 between Karl Benz's Benz & Cie., and Daimler Motoren
Gesellschaft.
Daimler-Benz and Chrysler Corporation‘s
strengths in 1998
Daimler-Benz
Mercedes is the most popular luxury brand
A strong dealer network
Ranked #17 globally
Chrysler Corporation
Low-end/sub-compact cars and trucks
Big auto manufacturer in North America
Mini-vans, Jeep and Dodge trucks
Ranked #25 globally
The Merger
In May, 1998, Daimler-Benz and Chrysler Corporation, two of the world's
leading car manufacturers, agreed to combine their businesses in what they
claimed to be a ―merger of equals.‖
The process began when Jurgen Schrempp and Robert Eaton met to discuss
the possible merger on January 18, 1998.
The merger was completed on November 12, 1998.
The merger resulted in a large automobile company, ranked third in the world
in terms of revenues, market capitalization and earnings, and fifth in the
number of units sold.
German and American styles of management differed sharply.
To minimize this clash of cultures, Schrempp decided to allow both groups to
maintain their existing cultures.
Troubled Times
When Chrysler performed badly in 2000, its American president, James P Holden,was replaced with Dieter Zetsche from Germany.
A few senior Chrysler executives had already left and more German executiveswere joining Chrysler at senior positions.
In an interview to the Financial Times in early 1999, Schrempp admitted that the―DCX deal was never really intended to be a merger of equals‖ and claimed that―Daimler-Benz had acquired Chrysler.‖
By the end of 2000, there were only 128,000 Chrysler employees still working inthe US operations.
Chrysler reported a third quarter loss of $512 million for the period endingSeptember 30, 2000; and its share value slipped below $40 from a high of $108 inJanuary 1999.
The expected and wished for synergy effects stayed out. Instead of gainingcompetitive advantage over their competitors, the merger rushed the two carproducers ever deeper into the crisis and did not provide the companies with thenecessary tools to overcome the recession.
Clash of Cultures
Mergers and acquisitions take place to
realize the synergies between the two or
more companies.
‗Daimler-Chrysler merger failed to realize
the synergies that were expected from the
merger‘
Opposing Cultures
Chrysler Daimler-Benz
Encouraged creativity Methodical decision-making
Egalitarian relations among staff Respect for authority, bureaucratic precision,
and centralized decision-making
American CEOs were rewarded handsomely Disliked huge pay disparities
Performed little paperwork and liked to keep
their meetings short
Used to lengthy reports and extended
discussions
Favoured fast-paced trial-and-error
experimentation
Detailed plans and precise implementation
Flat structure Top-down management approach
Imposing One‘s Culture
At first, the German management granted Chrysler the freedom to do what
they had always done.
Daimler-Benz wanted to simply take advantage of Chrysler‘s efficiency.
But a number of Chrysler‘s key players had left the corporation and remaining
employees were demoralized and demotivated.
Within 19 months two American CEOs were dismissed and German
management took over.
Daimler-Benz tried to administer the Chrysler division as if it was a German
company.
From Chrysler‘s point of view, instead making use of new synergy effects, and
instead of gaining competitive advantages over the competitors, the merger
with Daimler-Benz drove Chrysler into chaos.
In September, 2001, Business Week
wrote, ―…Daimler-Chrysler have
combined nothing beyond some
administrative departments, such as
finance and public relations.‖
Daimler Chrysler is a cross-cultural
merger. But it was a failure. What
culture differences were there?
What issues should be addressed to make a
cross-cultural merger a success?
Transnational Corporation- Distinct corporate cultures
We are not the same!
Power Distance-Germany(70),U.S.A(50)
Fewer women in higher positions-Germany
Individualism-U.S.A(91),Germany(67)
Masculinity Vs feminity- Germany (69),U.S.A(62)
Uncertainty Index-Germany (7),U.S.A(87)
Long term orientation-U.S.A(56),Germany(23)
Sorry ! I can‘t be you, I cannot change
Corporate structure
Corporate culture
Customer proposition
Value chain
Leadership
Practical experience
Pragmatic and goal oriented
Laid off from work
Daimler- conservative, rigid
Chrysler—informal, outward oriented
Future planning, supervisory boards, expatriate
management, executive salaries,labour relation
Consensus building, seniority
Headquarters moving to Germany
Use of German in meetings
More members from Germany in supervisory
Boards
Selection of corporate spouse
Lets make the marriage work!
Daimler finally divorces Chrysler-
How to avoid it
Stereotypes need to be unlearned
Recognize the differences in corporate context
Channels of communication must be open
Cross cultural training
Strategies to harness the intercultural differences
Development of cultural intelligence
Respect all workers-equal representation
Use of a common language
Hire a mediator
Partnership and trust vs. power and domination
Today you can eliminate that hyphen
because we are taking steps to make
Daimler Chrysler truly one company
everywhere in the world:
No Hyphens ;No spaces;
-Dieter Zesche,CEO,Daimler Chrysler
January 25 ,2006
Very often companies involved in a merger
claim it to be a merger of equals but this is
not the case always.
'The Daimler-Chrysler deal was never
expected to be a merger of equals.'
AIM-COMBINE CULTURE AND GENERATE
SHARED CORPORATE CULTURE.
POST-MERGER-IMPLEMENTATION.
Neither acquired by Daimler-Benz nor guaranteed equal status.
Freedom to Chrysler based on past success.
Eaton successors Holden and Stallkamp dismissed within 19 months.
German manager Zetsche and Bernard.
Chaos in Chrysler.
Conclusion
When it comes to cross-border or cross-cultural M&As, you must not
disregard the cultural differences inherent. One corporate culture
cannot simply suppress and replace the other one. A consensus has to
be reached and the foundation for a new culture, based on elements
of both cultures involved, has to be laid.
In the case of DaimlerChrysler, both parties were never truly willing to
cooperate wholeheartedly and to accept changes and to enter
compromises in order to make this merger of the two companies a
success.