The merger between Chrysler, the smallest yet most efficient US auto maker with Daimler’s legendary Mercedes-Benz was supposed to be a match made in Heaven. However, Chrysler’s management expectations were quickly erased as CEO Juergen Schrempp of Daimler never intended equality in running the new acquisition. Within the first year, it became apparent that Chrysler had become a division of Daimler - a point Schrempp verified in interviews with the media. Schrempp’s attempts at boosting Chrysler’s sales had flopped; the company experienced huge losses and Schrempp began to send his orders though his German assistant Deiter Zetsche, who was at least able to make some positive progress. However, with no input from Chrysler executives once again, Schrempp made another huge deal by acquiring 34% of Mistubishi Motors, which had been losing money as well. Schrempp also refused to meet with the 3rd largest holder of Daimler/Chrysler stock Kirk Kokorain to explain how he intended to turn the company around, most likely as a result of a clash of cultures, different nationalities, the German focus on hierarchy, or. order and planning. No turnarounds had been made and in 2006, Chrysler posted a 3rd quarter loss of $1.5 billion and it became apparent that Daimler would sell off Chrysler. The merger was over. The underlying intentions of Jurgen Schrempp to never accept the Chrysler merger as an equal should be considered unethical because of his attempts to take advantage of a smaller company using unconventional business practices. The original agreement and foundation for the Daimler-Chrysler merger assumed each CEO would respectively contribute to all decision making as co-chairs and co-CEOs. Additionally, each manufacturer would capitalize on expanded market exposure and shared engineering collaboration expertise. The agreement, however, never came to fruition and the much smaller Chrysler brand was subject to the decisions of Schrempp and his appointed German influences. Once Schrempp assumed total control over the merger, it was clear he always viewed Chrysler as a division of the conglomerate. His open admittance that he never intended the merge to be a joint venture of equals revealed his unethical tactics of deceiving the management of Chrysler, possibly drawn from his pursuit of globalizing his Euro brand at the cost of a North American company. Whenever two businesses enter into a partnership, especially across multinational borders, they must understand the strategic differences of each company and the changes that must be made starting from top management. Early problems could have been avoided if both CEOs recognized the merger as a whole rather than two separate pieces trying to find the best way to work in tandem. Foremost, the merger should have suggested the creation of an entirely new brand capable of international exposure. Instead, both Jurgen Schrempp and Robert Eaton were too occupied on their ability to make key decisions for their companies in their respective countries.

A committee easily would have created more synergy and support for the merger versus a single individual because of its composition of a number of individuals with their own perspective, background, and industry expertise. The purpose of the committee would be to act on and make key decisions towards the best interests of the company, where a single individual may be incapable. In Daimler-Chrysler’s case, we saw many questionable decisions by Schrempp, and given the end results, turned out to be unjustified and completely wrong. [pic]For example, soon after Chrysler’s profits began to slip after the merger, Schrempp did little to get to the bottom of the problem, not taking into account the possibility of increased competition, outdated car models, and future economic trends. The graph above represents the stock price between DaimlerChrysler (DCX), General Motors (GM), Ford (F). As depicted, DCX falls well below both GM and Ford. Nevertheless, Schrempp assumed he could sell as many cars as the plants could manufacture which only created overstocked dealerships and forced price cuts and rebates resulting in even worse bottom-line performance quarter to quarter. During this and many other situations, a committee for Daimler-Chrysler could have identified and reviewed problems faced by the car manufacturers in greater detail, and served as liaisons between both CEOs.

Schrempp clearly underestimated his confidence managing an American car company with his decisions to let go of all senior Chrysler executives. The formula under which he succeeded with Daimler did not translate over to North America. German management was very formal and structured, crafting their vehicles meticulously, with the Mercedes-Benz models the ultimate products of this work ethic. Almost the antithesis to the German style was the freewheeling management of Chrysler, encouraging creativity and innovation. With the replacement of all original executives, and the installment of foreign CEO Deiter Zetsche, the employees of Chrysler experienced a culture shock. It was said the employees felt like they were being punished and had lost all the excitement they once had for working for their former company. Zetsche was informed to turn the place around mostly through cost cutting methods such as the closing of plants and the layoffs of 29% of the workforce. Under the direction of Zetsche, it was also discovered that there were missed opportunities in the coordination of purchasing parts across the supply chain. Despite the efforts of Zetsche and slight improvements in Chrysler’s performance in 2004, the true innovative nature was gone and could not be saved due to declines in overall quality, increased employee dissatisfaction, and the emergence of Honda and other key competitors.

Chrysler’s senior management was “blind” to merger negotiations simply because they placed too much executive trust in the Daimler-Benz corporation. Clearly, Daimler was the bigger car brand with much more influence worldwide, carried by their highly respected Mercedes-Benz division. Chrysler on the other hand was struggling much throughout the 80s, and had only recently began seeing success prior to the merger with its newly introduced minivan segment. It was a classic case of Daimler having little to lose and a gigantic piece of the North American market to gain fueled by its supposed merger with Chrysler. As soon as the merger was announced, Daimler jumped at the opportunity and Chrysler did little to help its position by not initiating the proper due diligence. With the actual purchase of Chrysler by Daimler for $36 billion in 1998, all leverage had swung to the German counterpart. The senior management team at Chrysler assumed they would be able to work together in the best interests of the merger as equal partners, but instead had simply given the keys and complete control to Schrempp.

Cultural clashes could have been avoided if both CEOs put more effort in finding common grounds between their business principles and approach to management. It was obvious from the start German and American cultures as well as consumers were very different, so a single unified culture within Daimler-Chrysler may have not been feasible. But the idea of a single vision would have provided a platform for senior management to build unique subcultures. "It's no surprise that Schrempp is running the show. What is surprising is the way in which he is putting the two organizations together: forcing head-on confrontations, with the survivors left to run the company."1

Given the merger, both CEOs should have determined a single vision for Daimler-Chrysler 5, 10, or even 20 years into the future. Subsequently, this vision would have created cohesion in Daimler-Benz and Chrysler’s executives, employees, and shareholders giving everyone involved in the merger excitement and reason to believe it would work. With the two CEOs working together, the relationships between the employees in North America and Europe would have only strengthened as they shared their common bond for the growth of Daimler-Chrysler.

1 TIME, May 24, 1999, commenting on Daimler-Chrysler CEO, Jurgen Schrempp's style of management. Additionally, the creation of a global compliance team and consultants would have helped corporations institute cultural training methods while still giving leaders the flexibility to cater values and standards to the work environment. Finally, a very ambitious approach would have been Daimler and Chrysler to initiate collaborative projects and multinational engineer and employee swaps. The exposure of German engineers in U.S. plants and vice versa may have provided a very personal level of exposure necessary to create strong relationships and camaraderie all the while devising a vehicle embodying the creativity and quality of both cultures.