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Date: Wed, 12 May 2010 Time: 10:54 PM -
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On May 7, 1998, Daimler-Benz AG and Chrysler stunned the world by announcing that they had agreed to merge the two companies. There had been rumors for some time, yet when the news came, it made headlines. This was a first megamerger of two big international companies, and it would make DaimterChrysler the fifth largest maker of cars and light trucks in the world.
Juergen Schrempp, chief executive officer (CEO) of Daimler-Benz, and Robert Eaton, CEO of Chrysler, had met at Chrysler's headquarters on January 12, 1998, to explore-possible cooperation. That meeting, which lasted just 17 minutes, resulted in a decision to merge the two companies. The two CEOs met a number of times in Germany, London, New York, and South Africa in the following months, but their meetings were always kept secret. They never appeared together in public, and only a few trusted executives knew about the talks. In fact, each person who was told about the talks also was told that so far no information had leaked to the outside; therefore, any leaks in the future could be traced very easily and be punished accordingly. The threat worked, and everyone kept quiet.
When the merger was announced, Eaton and Schrempp hailed it as a "merger of equals." They were to be cochairs for three years. After that, Eaton would step down and Schrempp would become the sole CEO. There would be headquarters both in Auburn Hills, Michigan, and in Stuttgart, Germany. The company language would be English. Economies of scale and the sharing of technology and other information would result in huge savings — $400 million in the first year alone — and higher profits. Daimler would contribute engineering know-how, and Chrysler would contribute creativity and marketing savvy.
The merger was made official on November 17, 1998. On that day Eaton and Schrempp together rang the opening bell on Wall Street. In Stuttgart employees celebrated with an American-style party that included turkey. In Auburn Hills Chrysler employees ate potato salad and sauerkraut. Each member of the integration teams received half a share of stock in the new company.
It was one thing to announce the merger; it was an entirely different thing to make the merger work. Three international accounting firms, four investment hanks, and six corporate law partnerships worked on the merger. Clearly, both sides focused on financial, regulatory, legal, and business issues. As we will see. those issues played a major role; however, the merger almost was derailed over cultural issues.
To deal with internal merger issues, the company appointed 28 integration teams that set out to mesh the two corporations. The integration teams started their work in 1998 and officially finished in 1999; however, in a global company integration is an ongoing task. The members received some intercultural training, but they complained that the training was not very helpful and got stuck in stereotypes. For example- the Germans were told that Americans are superficial and that an invitation does not mean anything. When a German executive came to Auburn Hills, he therefore booked a hotel even though his American counterpart had invited him to stay at this house. We was very surprised that the American not only picked him up personally at the airport but actually him to his home. The Americans had been told that Germans are stiff and that form and politeness.
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