DC in the News - long story but funny

From: Stlaurent Mr Steven (STLAURENTS@MCTSSA.USMC.MIL)
Date: Tue Feb 15 2000 - 13:15:28 EST


                                    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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