ANALYSIS OF THE DAIMLER-CHRYSLER MERGER

When Chrysler Corporation and Daimler-Benz announced their merger in the late 1990s, it caused a stir in the automotive industry. Mergers and acquisitions have occurred in many different industries, particularly in the 1980s and 1990s, but the automotive industry had not seen a merger of such large companies based in different countries that had vastly different corporate cultures. This research considers the rationale for mergers and acquisitions in general, and considers the potential and the reality of the Daimler-Chrysler merger in particular.

RATIONALE FOR MERGERS AND ACQUISITIONS

Managing a multinational organization requires that companies take into account differences in the regions in which they operate. In doing so, they must determine whether it is more cost effective to enter a new region by simply going in directly, or whether a new region can be entered more effectively by forming a partnership with another company that is already successful. The same issues confront a company that is determining how to add new products to its product line. A company can take on the cost and burden of introducing new products on their own and offering the marketing support for this, or a company can use the expertise of another organization that has already laid the groundwork to accomplish the same task (Levine, 1998).

In addition to manufacturing automobiles and light trucks at the time of the merger, Chrysler al

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r hand, gained access to Daimler-Benz's European distribution and entrance into the luxury vehicle and heavy truck market. Chrysler also gained from Daimler's reputation for craftsmanship and quality while Daimler stood to benefit from Chrysler's efficiency within its organization. In general, however, the merger was seen at the time as more beneficial to Chrysler than to Daimler-Benz (Brennan, 1998). THE POSSIBILITIES THAT THE MERGER PRESENTED There are three strategies that the newly merged company could have adopted over the long-term. The first was to continue doing business as two separate companies under one corporate umbrella. The second was to organise operations by region (such as the world market except for the United States, and the United States). The third option was to bring the two companies together into a single unit that produces automobiles for the global market. If the newlyformed company did business as two separate entities, it could not take advantage of the relative strengths that the two companies possessed at the time of the merger, nor could it minimise their weaknesses. In this scenario, the new company would lose Chrysler's talent for efficiency as well as Daimler's talent for quality. The o

Category: Business - A