Auto Merger Celebrated Worlds Apart
DaimlerChrysler, created from a merger of two of the world’s most venerable car concerns, held a financial coming-out party Tuesday that may herald a new era of global automotive competition.
But behind the hoopla surrounding the combination of Chrysler Corp. and Daimler-Benz of Germany remains the difficult task of melding two huge institutions with proud heritages and vastly different cultures.
It won’t be easy. Even DaimlerChrysler officials note that 70% of major mergers fail because of cultural conflicts; the inability to make timely, professional decisions; or a reluctance to address controversy.
“We will have our ups and downs,” acknowledged Juergen Schrempp, co-chairman of the new company with Robert Eaton.
The pitfalls were put in the background Tuesday as DaimlerChrysler marked its debut as a publicly traded global company with festivities from Stuttgart, Germany, to Auburn Hills, Mich., the dual headquarters for the firm.
About 20,000 auto workers at Daimler’s Stuttgart headquarters were serenaded by a six-piece country music string ensemble and scantily clad cheerleaders from a nearby amateur American football club. The cafeteria served American-style turkey and corn on the cob, a dish normally regarded as animal fodder by Germans.
In Michigan, workers at Chrysler headquarters attended a ceremony to raise the new corporate flag. Thousands of balloons were dropped and employees were served a special “merger blend coffee” and apple strudel.
Although the merger technically was completed last week, the stock of the new company did not begin trading until Tuesday on the New York Stock Exchange. Marking the occasion, Schrempp and Eaton--standing on a balcony flanked by grilles from a Jeep Grand Cherokee and a Mercedes-Benz E-Class--jointly rang the bell to open trading.
“There is no blueprint for what we are doing today,” Eaton told reporters shortly afterward. “This is something new.”
Indeed, DaimlerChrysler shares soon will be traded on 19 major stock exchanges worldwide as a new kind of border-less security called a global share. In trading Tuesday on the NYSE, shares declined 44 cents to close at $83.88.
The $33-billion merger--the largest industrial merger ever completed--creates the world’s fifth-largest auto company in terms of volume, behind General Motors Corp., Ford Motor Co., Toyota Motor Co. and Volkswagen.
DaimlerChrysler, with annual revenue of about $132 billion and 428,000 workers, will produce more than 4 million cars and trucks a year, ranging from Chrysler’s Neon subcompact and Dodge Caravan minivan to Mercedes-Benz’s M-Class sport-utility vehicle and S-Class luxury sedan.
The merger is seen by some auto experts as just the first in a wave of consolidations likely to hit the industry as it copes with growing competitive pressures caused by excess manufacturing capacity. The oversupply is increasingly due to economic problems in emerging markets. Eaton estimates that the worldwide glut could hit 23 million excess vehicles by 2002 in a market that can support sales of about 50 million.
“Size does matter,” said Thomas Stallkamp, president of DaimlerChrysler. “We believe that having a broad product line is important to survive.”
Daimler, Europe’s largest industrial company, with interests in aerospace, rail cars and telecommunications, is known for its boxy Mercedes-Benz luxury sedans that offer cutting-edge technology, fine quality and snob appeal.
Chrysler, the No. 3 U.S. auto maker, is a feisty company that nearly went bankrupt twice only to emerge in the 1990s as a low-cost manufacturer known for product development prowess and design skill.
The merger was appealing because of the partners’ complementary product lines and little geographic overlap. Chrysler is strong in North America with its minivans, pickup trucks and sport-utility vehicles. Daimler is a major player in Europe with its luxury sedans and sport coupes. The Mercedes and Chrysler product lines and dealerships will remain separate.
Company officials said the auto maker is on track to reap $1.4 billion in first-year savings through joint parts purchases and reduced marketing costs. The savings are expected eventually to increase to $3 billion a year.
The company has provided little insight yet into how the merger will affect product plans. Eaton confirmed that Mercedes-Benz could develop a minivan with Chrysler’s expertise. DaimlerChrysler also is looking to expand in Asia, where it could introduce a new low-priced vehicle, acquire an existing auto maker or enter a joint venture. It continues to negotiate a possible deal with Nissan Diesel, the commercial truck maker.
While Eaton and Schrempp continue to insist that the formation of DaimlerChrysler is a merger of equals, many analysts and employees believe it really is a well-shrouded takeover of Chrysler by Daimler.
“The management structure in a year or two will tell you whether it’s a takeover or merger,” said Csaba Csere, editor of Car and Driver magazine.
Analysts said it will take several years for the firms to integrate fully. The biggest obstacle will be meshing Mercedes’ conservative, staid culture with Chrysler’s more freewheeling, dynamic one.
“The biggest single issue is merging the different management cultures,” said analyst David Healy of Burnham Securities. “There will be some bumpy going, but ultimately it will likely be a stronger company than if the two had remained separate.”
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Times staff writer Carol J. Williams in Berlin contributed to this report.
