Daimler Chrysler Merger Essay -- GCSE Business Marketing Coursework

Daimler Chrysler Merger Daimler Chrysler is the result of merging Daimler-Benz and the Chrysler Corporation in late 1998. The merger was to be one of the largest on record, and the beginning of a new wave of mergers sweeping through the automotive industry. Although the companies were manufacturing generally similar products, the differences between those products could not be wider. Chrysler was known for a product line consisting of mini-vans, light duty trucks, and four-wheel drive off-road vehicles; Daimler-Benz was known for its luxury brand of Mercedes-Benz vehicles and medium and heavy-duty over-the-road trucks. Merging the two companies entertained the idea of one entity possessing a product line covering nearly every type of wheeled vehicle. Daimler Chrysler’s strategy was to maintain separate brands and images, following its internal book, â€Å"Guidelines for Daimler Chrysler Brand Management.† This book outlined a strategy consistent with a clear separation of Mercedes-Benz and Chrysler brands. No sharing of common platforms, factories, or dealership networks was allowed. In effect, the two companies were to be run as separate entities; even the headquarters were to remain separate. It would appear a strategy consistent with these goals would severely limit any anticipated synergies of the merger. Upon completion of the merger, an industry wide overcapacity existed, and economic conditions suggested a further slowdown in auto sales on the horizon. Medium and heavy-duty truck sales were slowing down, Mercedes-Benz was facing stiff competition from the luxury Japanese car market, Chrysler was experiencing lackluster sales, and clearly, costs needed to be cut. The result was Daimler Chrysler’s announced layoffs of 26,000 employees and the idling of several assembly plants in North America. It became apparent to those outside the organization that the merger was more of a takeover by Daimler-Benz than a â€Å"merger of equals.† Clearly, Daimler-Benz emerged as the leading entity and named many of its executives to the board of directors. Chrysler’s management took a back seat, and the former Chrysler CEO was given a lesser role in the new organization. Since the completion of the merger, Daimler Chrysler stock (DCX) has suffered over a 55% decline. The fundamentals of the company trail i... ...strategic alliances with MMC and Hyundai should allow rapid penetration in the Asian market. The potential synergies, if realized, should allow increased production efficiencies while reducing costs. New product lead-time could be diminished sequentially, allowing an advantage over the competition, while incorporating Daimler-Benz’s engineering facilities with Chrysler should increase Chrysler’s perceived quality without sacrificing Mercedes-Benz’s brand image. Of late, the stock price has suffered more than its peers as investors recognize the lack of synergy if the entities are not combined in at least some capacity. Combining at least some portions of engineering, design, and manufacturing should be attempted, at least on an experimental basis, if any synergies are to be realized. Merging and acquiring companies without exploiting their comparative advantages offers little or no advantages. If Daimler Chrysler is to prosper in this very competitive industry, it should explore all potential comparative and strategic advantages to minimize costs while sharing its core competencies throughout the organization to increase market share and brand recognition.