The Daimler Chrysler Merger

The DaimlerChrysler Merger

In 1998, Daimler-Benz AG and Chrysler Corporation were coming together as a "merger of equals. The DaimlerChrysler fusion created revenues of $132 billion with approximately 440,000 employees.

Car Industry since the Beginning.

In the second half of the 20th Century (after WWII), car manufacturers focused on manufacturing more sensible and efficient cars; Japanese manufacturers were winning this race and by the end of the century, they were more than twice to more than 10 times as efficient as its other competitors.

In order to survive, car companies optimized their operations within a few years.

The Worldwide Market for Cars and Commercial Vehicles

During the past 5 decades, the world population has doubled; the number of cars increased to 500 million units. The global market for motor vehicles has grown from 46.4 million units in 1993 to 50.9 million units in 1998.

The three main regions, North America, Western Europe, and Japan, are the most important markets. These markets expected expansion to Asia and Latin America; but, due to currency volatility, high inflation, and competitive pressure, developing markets have proven difficult. Moreover, there were only a few profitable market niches left and lowering production costs wasn't enough to satisfy customers.

Trends of the industry

Overcapacity: Cause of the closing or 30 plants in the U.S. and Canada.

Continuing overcapacity has decreased the number of car companies. In 1960, a total of 42 independent car manufacturers existed; by 1999, only 17 remained.

Changing Role of Suppliers: Suppliers were required design, development, and production according to the strict quality standards, not just only supplying batches of parts to order.

Marketing and Brand Image is the Key: Manufacturers had started streamlining this channel by reducing excessive stocks and the number of dealers.

The traditional market segmentation became more difficult and in some cases obsolete due to overlapping segments. Car manufactures were forced to focus more on the power of brands.

Impact of Technology: The auto industry had become knowledge-intensive, and R&D was a crucial aspect of differentiating cars. Since the time-to-market has gotten shorter, manufacturers have decided to cooperate to reduce R&D expenses per vehicle.

Dealing with heavy pollution, many car companies started to invest in fuel cells.

DaimlerChrysler: Shake or be Shaken

Daimler-Benz was perceived as the incarnation of German engineering competence. DB cars sold in more than 200 countries, and Mercedes was one of the strongest global brands, but the future didn't look primising..

The European truck division produced heavy losses. And Japanese rivals pressed DB's luxury cars with similar quality and technology, but much lower prices.

In an operation called "stop the bleeding", all unprofitable units were restructured, closed, or sold.

How to survive in a Consolidating Industry:

* The number of brands competing in the luxury segment had increased form 9 to 19.

* The world economy was experiencing the longest expansion cycle in several decades.

* Mercedes-Benz's