The merger of Chrysler Corp. and Daimler-Benz moved closer to completion Friday as shareholders of the two storied companies overwhelmingly approved the $38-billion deal at separate meetings that were as different as their corporate cultures.
The Chrysler meeting was held in Wilmington, where the company was incorporated in 1925, in the ornate ballroom of the Hotel Du Pont. A vocal minority of the 150 shareholders present criticized Chairman Robert J. Eaton for selling an American institution to a foreign industrial giant whose history is marred by ties to Nazi Germany.
But in the end, after slightly more than two hours, Chrysler announced that 97.5% of ballots cast ahead of time or in person were in favor of the deal.
Six time zones away, about 15,000 Daimler shareholders filled a sports arena in Stuttgart, Germany, to question company Chairman Juergen Schrempp about the merger. Some of those in the audience--shareholders are required by German law to vote in person--worried that the deal would result in the "Americanization" of Daimler, Europe's largest industrial concern. Others criticized the higher salaries paid to Chrysler executives.
After 13 hours of debate, an estimated 99% voted to approve the merger.
The deal is expected to be completed in early November. The resulting company, to be known as DaimlerChrysler, will be the world's third-largest auto maker in terms of revenue and fifth in terms of vehicle sales.
The blockbuster merger deal, announced in May, is prompting the world's auto makers to recalibrate their strategies. More consolidations and joint ventures are expected among vehicle builders around the world in the coming months and years.
DaimlerChrysler will mesh the German luxury car line Mercedes-Benz with Chrysler's mass-market minivans, sport-utility vehicles and sedans. Approval of the merger was widely expected despite concerns raised by shareholders, ranging from the loss of two companies seen as national treasures to whether the deal is fair to investors.
Any drama in the voting was focused on Germany, where 75% approval by Daimler was required. However, management had sought at least 90% approval, a level that would allow the deal to be accounted for as a "pooling of interests," thereby eliminating any charges to future earnings.
The merger has generally been praised by analysts, who say it would provide Chrysler with much-needed geographic diversity beyond North America while giving Daimler a greater product range.
"This is positive for both companies," said David Bradley, an analyst for J.P. Morgan Securities.
David Healy of Burnham Securities said that while the combination would probably reduce costs, he is "uneasy about how smoothly they can mesh their disparate cultures."
Daimler is known as a more cautious, bureaucratic company, whereas Chrysler is given to faster, riskier moves. Eaton acknowledged that "changing business culture is not an easy job" but noted that there are already 28 teams working on smoothing the integration.
DaimlerChrysler is being touted as a global enterprise. Daimler is known for its engineering and technological prowess, while Chrysler brings to the table design and production expertise.
The companies expect combined earnings before taxes next year to increase 24% to $11.3 billion. They estimate that the merger will result in $1.4 billion in reduced costs in the first year, thanks largely to the combining of purchasing operations and some technology projects. Within three years, they expect savings of $3 billion to $5 billion a year.
"This is a merger of two equally strong companies," Eaton told shareholders. "This is not a merger to rationalize costs. It's a merger to produce growth."
But some Chrysler shareholders expressed opposition to the deal, saying it amounts to a takeover by Daimler. The combined company will be 58% owned by Daimler shareholders, 42% by Chrysler shareholders. However, when the deal is done, U.S. stockholders will hold 44% of the shares of the combined company, Germans 36%.
"I'm against it because we are losing a great American company, Chrysler Corp.," said New Jersey stockholder Gregory Palma. "We are losing our Chrysler identity. Chrysler has a great history. I'm afraid we are losing that."
Eaton said he is saddened by the disappearance of an independent Chrysler but that the move will ultimately strengthen the company, providing greater value to shareholders and protecting jobs.
Other shareholders criticized Eaton for the personal windfall he is reaping. He stands to make $70 million by cashing in stock options due him. However, he said those options would have eventually been paid even without the merger.
Eaton will earn $70 million next year in pay and stock options, while Schrempp earns $2 million. Eaton defends his salary as a reflection of increasing shareholder value in the company.
Schrempp said the decision on whether his and other Daimler executives' salaries should be boosted to the level of Chrysler executives must be made by the DaimlerChrysler management and advisory board.
DaimlerChrysler is to be headed jointly by Schrempp and Eaton until Eaton retires in three years, leaving Schrempp as sole chairman.
Since the merger was announced, auto makers have been looking for possible partners. Just this week, GM raised its stake in Suzuki from 3.3% to 10%.
Daimler and Chrysler expect their deal to be completed in early November.
Daimler holders will swap their shares 1-for-1 in the new entity. Chrysler holders will get 0.6235 shares of the new entity for each Chrysler share.
Chrysler rose $1.63 to $51.50 on the New York Stock Exchange. Daimler's NYSE-traded shares rose $1.44 to $88.88.