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 also sold defense-related products to the American military. It divested its Gulfstream Aerospace--a manufacturer of corporate jets--in the early 1990s, and in 1997, received more than 96 percent of its revenues and 87 percent of its profits from its automotive sales (Levy, 1998). Daimler-Benz, on the other hand, participated not only in the automotive industry, but also in aerospace, defense product and space systems. The company was also a significant participant in the...