Wednesday 13 March 2013

Daimler and Chrysler

This article is courtesy of time2resources. GLW

In 1998 Robert Eaton CEO of Chrysler (from the US) and Jurgen Schrempp CEO of Daimler-Benz (Germany) agreed to a merger.  Daimler paid $36bn for a 58% share of Chrysler. Shareholders in both companies approved of what was called a ‘merger of equals’ where both would benefit from the other’s strengths. However, Daimler was labour intensive and Schrempp saw economies of scale in the merger.  Eaton saw the benefits of a merger in terms of new markets and an increased global presence. 

Almost immediately problems arose. One area of concern related to the different brands.  Daimler’s Mercedes brand was seen as sophisticated, conservative and high quality.  Chrysler’s Jeep was brash, risk-taking and down market.  Daimler had great engineering skills and used advanced technology; Chrysler was renowned for its innovation and the speed of new product development. There were also a number of redundancies at Chrysler, something which had not been anticipated.

The main cause of the problems, however, was believed to be the differences in culture. Daimler had a hierarchical structure and management style.  Employees showed some signs of individualism but Hofstede’s collectivist culture was apparent throughout.  Every employee knew their position within the hierarchy and decision-making was centralised, methodical and based scientifically on data.  Jobs were undertaken for the benefit of the company.

Chrysler had a more informal, relaxed approach. Creativity and team-working was at the heart of the business and employees were empowered. Hofstede’s individualistic culture was paramount. Chrysler employees believed that Daimler was trying to impose its culture on them. Core workers at Chrysler, including senior executives and engineers, left the company. One analyst said ‘You had two companies from different countries with different languages and different styles come together’.  Perhaps it was inevitable that there would be a clash of cultures.

You can read another good article about this mismatch here

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