Over the recent past, the motor industry has faced a lot of mergers between companies in the bid to get more clients and internationalize their horizons. The well planned mergers have arguably led to relative success while those that might have omitted some key issues have had to contend with the detrimental losses.
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One of the most outspoken and widely renowned automobile stories is the hopefully planned, yet ill-fated, merger between Chrysler and Daimler which resulted in great losses by both companies. It is based on their failed merger that this paper seeks to highlight various aspects of the merger by doing a circumspect on the merger—with major emphasis being on the HR aspects of the deal.
Background/ Overview of the Merger
Even before the 1998 merger, both Daimler and Chrysler had to face surmountable HR challenges ranging from stiff market competition, diversification of products and services, global recession, over-capacity, technological changes among many other factors (Bruner et al. 5-15).
Nevertheless, through their hard-working leaders and ingenious contribution from various innovative individuals; both companies were able to stay afloat in the murky waters of the automobile industry.
By the end of 1997, both companies had already re-established themselves as dominant forces in automobile dealership with Daimler-Benz being a leading company in premium passenger cars and trucks in the Germany while the Chrysler commanding significant influence in the automobile industry as “the third largest manufacturer of cars and trucks” in America (Lutz 50-63).
It is however from the growing HR issues such competition from other automobile companies, the need to expand markets into international horizons, the need to establish a formidable financial partnership that would better Daimler’s good finances (at that time) while uplifting Chrysler from its eminent bankruptcy, the need to share the vast potentiality and expertise from both companies that Jürgen Schrempp (the CEO of Daimler) and Robert Eaton (Chrysler’s CEO) saw the need to form a merger (Woods; & Lutz 50-65).
As is detailed later, this determination and hope backfired on them as they faced greater challenges that led to the downfall of two of the most revered automobile companies in the whole world.
Analysis of the Merger: Pre-deal and Post-deal HR Strategies
Going by the documented results and scholarly discussions of the merger, very little was shown for the immense positivity and hope that Daimler and Chrysler had when their merger was established. Apart from a slight increase in the GDP rates in both Germany and the U.S (Bruner et al. 44); much of the merger results were considered very humiliating and devastating—to say the least (Wilson).
Wilson additionally says that in the latter years of the merger, there was a relative increase in employment which greatly boosted the economic status of both Germany and U.S.A. Wilson asserts that this merger resulted in the opening up of more trading fronts for vehicles, spare parts as well as other vital automobile accessories which relatively boosted the financial output of the Chrysler-Daimler partnership (Woods).
However, cumulatively, the products and services that emerged from this business partnership were not able to give returns as earlier projected by the planners or even as later re-planned by the management in question. In fact, there were not even enough returns to cater for the huge amount of money that were initially pumped into the project (Bruner et. al. 42-44). The SWOT analysis below gives a succinct analysis of the intricacies of the merger between Daimler-Benz and Chrysler.
SWOT Analysis of the Merger
As of 1997, both companies were dominant in their respective states. The formation of a merger would therefore not only increase their domination locally, but also open international fronts for more marketing and sales of their various products and services. The merger also offered a chance to further the strength of the companies in terms of developing new products and services which were very vital for an increase in profit margins.
Lastly, both companies were strong in terms of their technical expertise. By merging, both of the companies had the chance to learn from one another, incorporate their unique skills and invent new strategies or systems of operation even as they worked to further the common goal of ensuring the overall growth of the company as a unified entity.
According to Wilson, merging the companies would mean that would be an incorporation of designs from both Chrysler and Daimler. This greatly limited both Daimler and Chrysler since these two companies had already tried designing new automotive products to no avail. The chances of the merger witnessing some success were therefore quite limited.
Again, the German market tended to be freer as opposed to the U.S market which was quite rigid in terms of the policies governing sales, marketing and circulation of money.
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This difference in socio-cultural, economic and political environment, therefore, made it difficult for the formation of a unified cash-flow system that accommodated the needs of both companies. Most scholars point at these “weaknesses”, especially the cultural mismatch, as the major reasons for the alleged failure of the merger (Wilson).
As stated earlier, this merger would open a vista of endless positive opportunities for the expansion of market bases, inception of new products, joining of superior technologies and even creating employment opportunities.
Curcio (25-35) observes that a merger, of this kind, would pose threats like the phasing out of some unique designs in the name of creating new ones, lack of independence amongst the companies, over-capacity of equipment, development of unstable products and services based on the incorporation of numerous technologies, among many others.
Similarly, there was the risk of competition amongst the partners in the bid for who gets the lion’s share of profits or benefits from the company. This would in turn inhibit positive growth of the partners.
As glimpsed by the discussions above, the merger between Daimler-Benz and Chrysler was well- intended, but not properly thought-through or soundly-planned by the HR department and the management at large.
Resultantly, the merger ended up failing, to a greater extent, with only minimal cases being cited of success (Woods). This outcome underlines the great importance of proper planning and good HR management, among other salient factors, that need to be keenly considered before getting into any merger or acquisition.
Finally, it is worth noting that the merger did not live up to its expectations. A lot of technical know-how, money, expertise and time was put into it, but very little was realized (Woods). However, several other companies have been able to learn from Daimler and Chrysler’s mistake and managed their HR endeavors in a better way.
Bruner, Robert, Christman Petra, Spekman Robert, Kannry Brian, and Davis Melinda 1998, Chrysler Corporation: Negotiations between Daimler and Chrysler. PDF file. Web.
Curcio, Vincent. Chrysler: The Life and Times of an Automotive Genius. New York, NY: Oxford University Press, Inc., 2001. Print.
Lutz, Robert. Guts: the Seven Laws of Business that Made Chrysler the World’s Hottest Car Company. New York, NY: John Wiley & Sons, Inc., 1998. Print.
Wilson, Rich. Daimler/Chrysler Merger: The Culture Clash Pays Off. 1 Jan. 2005. Web.
Woods, Lauren. How Daimler, Chrysler merger failed. 18 May 2007. Web.