Two companies, too many
blunders
DaimlerChrysler merger was riddled
early with bad decisions
February 15, 2000
BY GERALD and SUSAN MEYERS
If one learns from making mistakes,
DaimlerChrysler has surely earned a PhD
in
what not to do in a merger.
What went wrong at
DaimlerChrysler AG?
What does cochairman Robert Eaton know
in
his heart as he makes his precipitous
departure,
retiring on March 31? And what can we
learn
from this momentous coupling of
industrial
giants?
The problem isn't the strategy of
combining the
assets of these two corporations. Nor is
it the
timing of the marriage. Both were surely
defensible. But DaimlerChrysler made
tactical
errors right from the onset. The first
18 months
were marred by a series of mistakes.
Overstating the
case: Combining these
two companies makes
sense as national
borders melt away and global businesses
grow.
Chrysler's strengths and Daimler's needs
fit
hand-in-glove. But the new company's
early
prediction that it would soon be the
biggest and
most profitable auto company on the
planet
encouraged stratospheric expectations.
This annoying huff-puffery made
DaimlerChrysler look bad. After all,
Ford
Motor Co. and General Motors Corp. are
still
around and a giant step ahead of the
pack in
most respects, with Toyota nipping at
their
heels.
Prematurely proclaiming contentment:
The deal was described as a marriage of
equals.
Two equally powerful CEOs would share
the
throne, though they barely knew each
other.
Knowledgeable observers never swallowed
this
assertion. The history of such instant
linkages is
dreadful. This was either a transparent
attempt
to keep people on both sides happy or a
simple
self-delusion. In fact, no one ever
expected
Daimler-Benz CEO Juergen Schrempp to do
anything but rule Chrysler from
Stuttgart.
Lame-ducking the boss: Eaton
emasculated
himself early on by announcing his
imminent
early retirement to take effect any time
-- maybe
soon, but perhaps not for three years.
Who goes to a lame duck for answers? Or
for
decisions? Eaton's people took no
comfort from
his attempt at a shared stewardship.
Instead,
they saw through it. If Eaton was not
long for
this world, then they'd better start
pleasing the
new German boss. Senior executives began
to
bail out.
Announcing incredible and immediate
economies: Chrysler and Daimler, before
they
became business partners, overlapped in
few
places, and so the extravagant
prediction of
billions in savings was beyond
reasonable belief.
Some joining of efforts would of course
yield
modest economies in purchasing and
engineering, but nothing earthshaking.
DaimlerChrysler boasted that in its
first years it
would save a couple
tractor-trailers-full of
money. It couldn't and didn't.
Forcing a culture blend: Before the
historic
1998 merger, Daimler-Benz was known for
its
top-down management approach. Chrysler,
by
contrast, was a humble collection of
colorful
consensus managers.
DaimlerChrysler said they could be
merged in
12 months. But authoritarian German
management methods proved so foreign
compared to the non-hierarchical style
at
Chrysler that the
management-merger-of-equals
effort had to be junked, resulting in
more
disillusionment and departures,
involuntary and
otherwise. They included Thomas
Stallkamp, a
fine Chrysler president and cost-cutter
deluxe,
thrown to the wolves.
Taking Wall Street for granted:
Chrysler
and Daimler felt certain that DCX would
easily
earn a spot in the Standard & Poors 500
Index.
After all, this deal was planned and
presented as
an enhancement of a strong American
corporation, a shimmering American
success
story. Surely U.S. investors would want
this
new and improved automaker represented
in
the world's closely followed stock
index.
But DaimlerChrysler, now incorporated in
Germany, was rebuffed. Chrysler suffered
a
devastating drop in market value on the
New
York Stock Exchange as index-fund
holders
dumped Chrysler stock in the United
States,
much of it to be snapped up at bargain
prices by
German buyers.
The last visible vestiges of the
original Chrysler
management team have disappeared with
Eaton.
The pretense that DaimlerChrysler is two
auto
companies operating as one under
mutually
compatible management has shattered. The
Chrysler corporation as we knew and
loved it is
dead. We will know it in the future as
one of
several DaimlerChrysler subsidiaries.
Whether Chrysler and Daimler-Benz would
have been better off as separate, but
perhaps
strategic, partners is an academic
exercise.
Years from now the results of the buyout
will
probably be rewarding to company
shareholders. For now, however, it is a
company combination that got off to a
bad start
and made mistakes from which we can all
learn.
Chrysler, rest in peace.
-----------------------------------------------------------------
Steven St.Laurent
Test Engineer
Test Branch, GSD,MCTSSA
MARCORSYSCOM, US Marine Corps
mailto:stlaurents@mctssa.usmc.mil (work)
mailto:Saint1958@home.com (home)
Office: (760) 725-2296
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