The Merger of DaimlerChrysler

Content

1. The histories of the partners
1.1 The history of Daimler-Benz
1.2 The history of Chrysler

2. The merger / takeover
2.1 Why did they merge?
2.2 How was the merger / takeover executed?

3. After the merger: What happened? / Were the goals reached?

4. Mistakes: What went wrong and why?

5. Outlook
5.1 Where are they today?
5.2 Was the merger a good idea? / Who benefited from the transaction?

6. Bibliography

1. The histories of the partners

The merger between the two partners -Daimler-Benz and Chrysler- is not only a merger of the brands Mercedes-Benz and Chrysler. In the histories of the two partners there have been many other mergers and both companies also have been busy in fields which have not got directly anything to do with cars. At the time of the merger in 1998 the two companies already included several car-makes which they had acquired in the course of time.

Because of the interesting history of the two partners I put more weight on this point to make clear how exactly it came to the corporate group today.

1.1 The history of Daimler-Benz

The history of Daimler-Benz reaches back to the year 1883, when on October 1st Karl Benz founded the "Benz & Co. Rheinische Gasmotoren-Fabrik" in Mannheim together with the businessman Max Kaspar Rose and the commercial agent Friedrich Wilhelm Esslinger in the legal form of "Offene Handelsgesellschaft (oHG)". On January 29th in 1886 Karl Benz got a patent on the motor-cycle. On March 8th of the same year he ordered a coach in Stuttgart where he inserted a motor and that way the first automobile on four wheels was born.

Four years later, in 1890, a certain Gottlieb Daimler founded the "Daimler-Motoren-Gesellschaft" in Stuttgart. In 1902 he had his brand registered as a "Mercedes" trade mark which was thus legally protected. One year later the "Daimler-Motoren-Gesellschaft" started up its first production facilities in Untertürkheim near Stuttgart. In 1907 another plant started the production of fire engines in Berlin-Marienfelde. In the year 1911 the "Daimler-Motoren-Gesellschaft" shares were introduced on the Stuttgart stock exchange. But the company did not only concentrate on cars. In 1918 for example they started to produce motors for aeroplanes in their plant in Sindelfingen. The "Benz & Cie." company and the "Daimler-Motoren-Gesellschaft" got into contact in 1924 when they joined in a "community of interests". Two years after that they merged as "Daimler-Benz AG". The headquarters of the company was located in Berlin whereas the organisation of the central administration began in Untertürkheim. The car production was also concentrated in Untertürkheim, the truck production in Gaggenau while the car bodies were manufactured in Sindelfingen.

After the hard times of the World War II where big parts of the Sindelfingen plant were destroyed, the company started to develop several types of cars and trucks which were sold very successfully after the war. The company also expanded into other countries like Argentina, North America, Brazil and Australia and was also very successful in motor racings. In 1959 it became the European market-leader in cars for the upper middle-class and in 1962 the one millionth Mercedes-Benz car after the World War II was produced. Three years later Mercedes-Benz became the biggest truck producer in the European Community.

In 1966 the "Mercedes-Benz Motorenbau GmbH" merged with the "Maybach Motorenbau GmbH". The new company was then called "Maybach Mercedes-Benz Motorenbau GmbH" with "Mercedes-Benz" owning the biggest parts of it. Another union was executed two years later when "Daimler-Benz" founded the "Hanomag-Henschel Fahrzeugwerke GmbH" in Hanover together with the "Rheinische Stahlwerke AG". In 1969 the "Maybach Mercedes-Benz Motorenbau GmbH" merged with the "Maschinenfabrik Augsburg-Nürnberg AG (MAN)" to the "MTU Motoren- und Turbinenunion" located in Friedrichshafen and Munich of which both companies (Daimler-Benz and MAN) held equal shares. Another federation took place in 1979 when "Daimler-Benz" launched the cross-country vehicle "G-Class" which they had developed together with "Steyr-Daimler-Puch", an Austrian company. This type is still produced in Graz (Austria) today. In December 1984 the "Daimler-Benz AG" took over the majority of the South African "United Car and Diesel Distributors (Pty) Ltd.", one of the biggest companies of the South African automobile industry. In the spring of the following year "Daimler-Benz" bought the "MTU"-shares from "MAN" and the majority of the shares of the "Dornier GmbH". On May 19th of the year 1989 the "Deutsche Aerospace AG" (Dasa) was established by the merger of "Dornier GmbH", "MTU" and two sectors of "AEG AG" as a 100 percent subsidiary of the "Daimler-Benz Group". One month later the "Mercedes-Benz AG" was founded with the "Daimler-Benz AG" forming the roof of the "Mercedes-Benz AG", the "AEG AG" and the "Deutsche Aerospace AG" which remained independent divisions. At the end of the year 1989 the aeroplane company "Messerschmidt-Bölkow-Blohm AG" (MBB) became a subsidiary of Daimler-Benz and was later integrated into the "Deutsche Airbus GmbH".

The enlargement of the company continued in 1990 when in July the "Daimler-Benz Inter Services" (debis) was established. It was the fourth corporate unit of the "Daimler-Benz AG" and included the business units IT-Services, Financial Services, Insurance Brokerage and Trade and Marketing Services. In November 1991 "debis" entered a cooperation with "Marsh & McLennan", the world´s biggest insurance broker situated in New York. Furthermore the "DITGAS Handelshaus GmbH" was established as a joint venture between "debis" and the Russian energy company "Gasprom". In April 1994 the "Micro Compact Car AG" (MCC AG) was founded in Switzerland as a community company of the "Mercedes-Benz AG" and the "Schweizerische Gesellschaft für Mikroelektronik und Uhrenindustrie" (SMH) and later launched the small car "Smart". In September of the same year the "Mercedes-Benz AG" took over the bus-manufacturer "Kässbohrer" in Ulm. In 1995 the "Deutsche Aerospace AG" was renamed "Daimler-Benz Aerospace AG" and Jürgen E. Schrempp became chairman of the board of management of the "Daimler-Benz AG". He was described as gutsy, earthy and wilful and spent the fomer periods of his life in South Africa.^[1] In 1996 "debis" started to cooperate with "Microsoft" and "Bertelsmann". In February 1997 "Mercedes-Benz" bought a truck-business from Ford in the USA which in 1998 was called "Sterling".

On April 1st of the year 1997 the "Daimler-Benz Group" was given an new organisational structure. The "Mercedes-Benz AG" fused with the "Daimler-Benz AG" and continued under the name "Daimler-Benz AG". The company now consisted of the divisions Passenger Cars, Commercial Vehicles, Aerospace, Services (debis) and some industrial participations.

1.2 The history of Chrysler

In the year 1925 on June 6th, the Chrysler Corporation was founded out of the "Maxwell Motor Company" by Walter P. Chrysler who had been a chairman there since 1921. The shares were worth $ 400 million and at the end of the year the company already had a net profit of more than $ 4 million. Three years later the company expanded and took over "Dodge Brothers Inc", a company five times the size of Chrysler. Dodge had been in the automobile business since 1914, had made the first large series cars with all-steel bodies and had also been well-known for its line of commercial trucks. Afterwards Chrysler launched the "Plymouth" brand for the lower price range and the "DeSoto" brand for the middle price range. In 1929 Chrysler joined General Motors (GM) and Ford. Together they were known as the "Big Three", the biggest three American car manufacturers. At this time the Chrysler Corp. included the brands Chrysler, Dodge, Imperial, DeSoto and Plymouth. The company ran very successfully and in 1936 it achieved an annual production of one million cars. Two years later its production included 25 % of all the cars produced in the USA. In 1941 "Willys-Overland", a car company where Walter P. Chrysler had worked as executive vice president in 1920, was commissioned to produce the "Jeep". In 1963 "Willys-Overland" became the "Kaiser-Jeep Corporation". In 1970 the American Motors Corporation (AMC) bought it for $ 70 million. Chrysler bought AMC in 1987 for $ 800 million and that way the "Jeep" brand was now owned by Chrysler.

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^[1] The Economist July 29th 2000, p. 70, "Merger Brief – The DaimlerChrysler emulsion", columns 6, 7