DaimlerChrysler: The Quest to Create “One Company”
Case Analysis

AMBA 650
Professor Bensimon
February 12, 2013

In 1998, the Daimler Benz and Chrysler companies decided to merge together in an effort to capitalize on each other positioning in their respective markets. This merger would join together Germans and American to create synergy to dominate the world automotive market. In theory, this was a brilliant idea to bring together the best engineers and auto stylists in the world. However, differences in culture which was thought to be a minor barrier turned out to be a major underlying factor behind the failure of DaimlerChrysler. Separate cultural ideals on business practices, communications and management destroyed this endeavor. In this case analysis, we will evaluate and understand how cultural differences, organizational structure, management styles, integration strategy and stakeholders played a role in this failure.
The cultures of these two companies were totally different; Daimler Benz was aggressive and believed in gaining every advantage possible to be the top automotive company in the world. Chrysler was a firm that was non-aggressive and progressed slowly. They believed that they gained most of their success from production and operations flexibility. In addition to this, the procedures for compensation and decision-making cause severe friction between top level managers of the newly merged DaimlerChrysler. At lower levels, employees bickered about items such as working hours, dress code and smoking while working. Language barriers definitely became a major point of emphasis between the two different factions of the new company. Chrysler veterans had almost no ability to speak or write in German. Meanwhile, Daimler managers could speak some English but not at a level consistent enough to forge new business relationships with fluent English speakers.
Chrysler’s idea/standard for innovation means to look towards new changes, converting meaningful ideas into instruments for profit and creating and constructing great cars. Daimler’s idea of innovation is more analytical, future forward and advanced technology focused. In the next section, we will understand the challenges/barriers that were likely to arise from the stated expected benefits and savings mentioned when the merger was first touted.
There were several challenges to the expected benefits and savings that were predicted were to occur through the merger. The reduction of costs comparative to competitors would improve DaimlerChrysler’s competitive position in the market and reinforce the company’s financial position. These predictions, however, were contingent upon successfully utilizing each other’s partnerships with suppliers cooperatively. We now know that cooperation was a major barrier for the company as they moved forward. We will now evaluate the two companies’ organization structures to understand the challenges these different structures created.
Differences with the Daimler’s organizational structure to Chrysler’s had a major impact on the early struggles of the merger. Corporate structure at Daimler had a traditional hierarchical structure, top to bottom, matrix-styled management. Chrysler’s was a team-orientated which encouraged input from all employees, regardless of rank or position within the organization. Corporate culture at Daimler consisted of management processes of planning, organizing and controlling. Daimler was certainly more conservative, efficient and safe. Chrysler corporate culture included setting goals, directing and monitoring implementation. Chrysler had become known as the risk-taking underdog of the US auto industry.

Customer proposition also was a major difference between the two merges. Daimler’s idea of attraction was the driving image and experience associated with the highest quality available in the market. Chrysler’s was producing attractive, eye-catching designs at a very competitive price. Value chain was perhaps the most glaring difference between the two organizations. Daimler placed emphasis on engineering, design, quality and after sales services. Chrysler emphasized high volume, low cost manufacturing and distribution.
In the next section, we will develop an understanding of the issues that came about from the different leadership styles of DaimlerChrysler’s three different leaders.
Schrempp had described as a master of boardroom politics in which he employed aggressive American-style management tactics. He was a driven and charismatic man who put business above all else. Often considered to be arrogant, he was not one to have his time wasted. Eaton was described as a focused man with a mild manner and even temper. He did not want to be the certain of attention and was not forceful in any sense. His strong sense of confidence in himself was a strong point of his leadership. According to his executive profile located in the case study Stallkamp is described as someone who has a small ego. Also, along with an easy going personality, he is said to have a keen sense of humor and the ability to get groups of people to march to one beat.
Schrempp’s abrupt self-centered nature definitely had an impact on the Chrysler employees in particular. Chrysler was an organization that valued employee input and bring seriously considered. Eaton’s attitude was perhaps too soft for the new German employees who were used to having a more imposing management figure to lead them. This could have created an unintended lack of respect for Eaton’s authority. Stallkamp likely would have encountered the same type of issues as Eaton, there personalities were too similar. We will now transition to an evaluation of Stallkamp’s strategy to achieve integration between Daimler and Chrysler.
Stallkamp’s strategy for the integration of Daimler and Chrysler was to sell to all the employees that a new culture was being created. The idea was to make everyone feel as though they were one company and had to create their own culture by integrating the best from both factions. He did not feel that communication and culture were going to be a severe impediment to overcome. He hoped that his enthusiasm for this culture creation would be shared by both groups of employees. He soon discovered that the integration process would not be as seamless as first believed. The differences between American and German business practices were very stark and became a major points of conflict. In the next section, we will discuss the key stakeholders of the merger and the issues and that Stallkamp had to deal solve.
There were several different groups of specific stakeholders that Stallkamp had to deal with in order to make the merger smooth. Those stakeholders included customers, employees, trade unions, investors, suppliers, national and local governments, local residents, and neighbors of the production facilities. Their issues and concerns were numerous but their main concern were the differences in culture between the American and German groups involved. The lack of goodwill hurt the merger because there was no buy in from hardly any of the interest groups. We will now evaluate what could have been done differently to achieve integration between both of these companies.
At the end of the day, this merger was an epic disaster on the part of two organizations that did not take into consideration the little things. Culture and business principles sometimes do take precedent over the overall goal of producing profit. If I were the man leading the merger of Daimler-Chrysler, I would have done the following things to ensure that this merger would have gone as seamless as possible. The first thing I would have realized in this particular situation is that there are no partnerships of equals. This means one of the companies would have had to acknowledge that they were going to give away some of their culture and operating procedures. Second, avoiding arrogance would have been an important factor because in culture it goes deeper. Being perceived as the arrogant foreign guys is never a way to obtain buy-in to a new system. As a matter of fact, it’s a surefire turn-off way to achieve resistance. Other items that I would have been mindful of are differences in culture, methods of communications and viewing employees as assets not liabilities and timing.