Business Paper

Business Paper

The Daimler Chrysler (1998) Merger

Daimler Benz, a German auto manufacturer merged with Chrysler, an American based company in 1998. The CEO of Daimler at that time, Juergen Schrempp announced it to be a “merger of two equal” corporations, however, his prediction has now proved to be false. The new company has therefore become extremely notorious worldwide, for being the precise opposite. Juergen Schrempp had released reports and there was considerable speculation around the time when Daimler had been looing outside Germany for a company to acquire or merge with, before 1998 when they decided to finally merge with Chrysler for a “stock swap” worth almost thirty six billion dollars. There was a forecast of more than one hundred and thirty billion in sales yearly, which would put the new DaimlerChrysler squarely on top with the rest of the world's largest manufacturers, and therefore it was predicted to be a perfect match (Wolf, 2007).

Chrysler had been a one of the steady companies of the American market before the merger, with an average of more than ninety four thousand employees and a sixteen percent share in the sales of new vehicles nationwide. Daimler Benz was and still is a leading manufacturer in Germany, and it was the low cost production line owned by Chrysler as well as a set route into the American market which had attracted the company initially (Wolf, 2007). Whereas Chrysler wanted access to the Daimler Benz's components and parts in order to reduce the cost of future models.

However, as it obvious, this merger did not work out as planned or predicted. Daimler's Mercedez Benz would provide the required parts to Chrysler did not like the idea and Chrysler only ended up getting a few suspensions and steerings interspersed with some motor packages and diesel engines. Moreover, Daimler had not provided for the Asian competition flooding the American market with their vehicles, and as a consequence, Chrysler could not fulfill its promise to pave a smooth path for Daimler into the U.S. market (Wolf, 2007).

According to a report by Standard and Poor, in the period of three years from the date of the merger, DaimlerChrysler were still not worth more than the previous company, Daimler Benz had been (www.standardandpoors.com, 2012). However, Chrysler got an even worse deal than Daimler, as by the ending of 2000, its stock had reached an all time low, almost by a third, and therefore, it was clear that Daimler Benz had manipulated Chrysler as the merger was clearly in the favor on Daimler Benz only (Wolf, 2007). The German company, Daimler Benz had by the third quarter of the same year shown an operating profit of eight hundred and thirty billion Euros, whereas Chrysler had lost by a wide margin of Five hundred and twelve million dollars, and till date, Chrysler has not experiences high revenues.

After the “cracks” started appearing, the president of Chrysler, James Holden in between 1999 and 2000 stated that a phenomenon where Mercedes was the “fancy and special” ...