Steering Around Culture Clashes

It’s 9 a.m. and the early shift at the Mercedes-Benz assembly plant is headed for its vesper, the first of the workday’s ritual beer breaks.

Once back on the floor of the cavernous workshops, the newly refreshed employees, in their uniform blue coveralls and safety glasses, light up their cigarettes at the control panels and machining stations.

Robots do all the heavy lifting in this high-tech automotive heartland these days, but the work force here remains overwhelmingly male.

Issues such as the risk of alcohol-related accidents, nonsmokers’ rights, sexual harassment and diversity in the workplace are sources of bemusement for those who turn out the cars whose name has become synonymous with perfection.

And one has only to glance at the official portrait of the new board of directors--18 members, all middle-aged, all white, all male--to be reassured that nothing has changed in Germany’s hidebound auto-making culture just because of the November merger of Daimler-Benz and Chrysler Corp.

“We’re not trying to bring two worlds together to create a new one. The ideal merged company will still have noticeable differences, like a choir that needs different voices to achieve the perfect sound,” says Dirk V. Simmons, a corporate strategist from Daimler-Benz now serving on the DaimlerChrysler integration team.

Those guiding history’s biggest industrial marriage through its first daunting stages insist that the objective of uniting the two auto giants is to preserve each working environment’s unique qualities.

But cultural frictions have been identified as the primary pitfalls in unsuccessful cross-border joint ventures, of which there have been many. More than 70% of such mergers are given up as failures within three years, according to Daimler’s own extensive pre-merger research.

As a hedge against those discouraging statistics, DaimlerChrysler managers put together PMI. The initials may evoke images of a stress-induced affliction, but they stand for Post-Merger Integration, a 100-member team that has combed through the sorry details of 50 failed cross-border partnerships to identify the frictions before they can begin grating on this merger.

With trademark German efficiency, the integration specialists have produced lists of do’s and don’ts for industrial partnerships, isolating 98 miserable marriage traps and consigning them to 12 hit lists to be tackled by a bicultural team. The themes targeted for scrutiny run from the broadly divergent packages of compensation and benefits accorded auto workers on opposite sides of the ocean to sensitivity training to help each side’s executives understand the complexities of the other’s industrial culture.

Late-night brainstorming sessions and videoconferences between the headquarters in nearby Stuttgart, Germany, and in Auburn Hills, Mich., have themselves produced more issues for the strategists to ponder.

“We noticed right away that the American executives were more casually dressed,” says corporate communications director Roland Klein, one of the younger German executives to whom the notion of casual Fridays has some appeal. “You would never see anyone here without a tie on, even if they came in on a Saturday.”

The lingua franca of all management meetings now is English, which spares German executives the need to converse with each other using the informal du manner, as agreed by the PMI team. But Klein notes that the encouraged familiarity has not caught on: “As soon as two Germans are on their own again, they immediately revert to using Sie,” he says, referring to the formal German word for “you.”

German executives on the PMI team, which is supposed to finish its work and dissolve within two years, insist that the new cross-cultural partnership has the ideal qualities for a corporate marriage because Daimler-Benz had been evolving toward a more American style of corporate management since Juergen Schrempp took over as chairman in May 1995. His introduction of performance-related bonuses and streamlining of the industrial conglomerate to focus on its core products transformed Daimler-Benz into a profitable company that should adjust more easily to the U.S. strategies for doing business.

Under Schrempp’s guidance, Daimler-Benz became one of the first German companies to switch to U.S. accounting methods. Initiatives launched in February 1997 to create a more globally competitive company included the German auto-making world’s first labor agreement allowing management to change production schedules to fulfill orders more efficiently. In exchange, Daimler-Benz workers were promised there would be no layoffs through the end of 2000.

Fear of job losses was the main theme of resistance to the $33-billion merger before it was approved by both companies and their unions last year, and employees recognize that the merger means eventual setbacks on the job market.

“People are worried, but that’s not surprising in the current circumstances,” says Gerhard Maier, a product manager whose extended family is dependent on the DaimlerChrysler empire for its livelihood. “The generation of my father expected to work for Mercedes-Benz until the end of their working lives, but those of us today can’t be so sure.”

Most workers shrug off the effects of the merger as imperceptible at the production level.

“I come through here 16 times a day, and I can’t find one thing that is different now,” says Herbert Spies, who conducts tours through the assembly facilities for visiting executives and new hires.

Finding a delicate balance between preserving a familiar working atmosphere and getting across to employees that their company has a new identity is one of the most challenging tasks for the integration team, says Simmons, the corporate strategist.

Although cultural differences are said to be the downfall of most failed cross-border ventures, the merger’s promoters cite production issues in arguing that their corporate marriage will be a success.

The most important factor in DaimlerChrysler’s favor, Klein says, is that there is virtually no overlap in the combined product line spanning Plymouth subcompacts up to the Mercedes-Benz luxury S-Class. Even the few models that appear to compete for similar markets, such as the Jeep Grand Cherokee and Mercedes M-Class sport-utility vehicles, appeal to different types of consumers, he says.

“The Grand Cherokee driver is an adventurer, someone in cowboy boots, the Marlboro Man, while the Mercedes ML appeals to the traditional Mercedes driver, someone cautious, conservative, safety conscious,” Klein says.

The joined manufacturers expect to achieve $1.4 billion in cost-saving “synergies” in the first year alone by combining purchasing operations and some technology projects, for example. The company says bigger economies may become possible later if the auto makers produce future models together. And Daimler may not yet be done shopping for partners and new opportunities for growth; the company is among the rumored suitors for all or part of troubled Nissan Motor Co. of Japan.

But industry analysts are less sanguine about the very qualities that DaimlerChrysler strategists are promoting as keys to success.

“There is hardly any overlap in the product range of DaimlerChrysler, which means the potential for cost savings is pretty limited,” says Lothar Lubinetzki, automotive analyst for Enskilda Securities in London. “The real benefits of a merger come only with the implementation of a platform strategy, and there is no indication DaimlerChrysler is going to do this.”

That strategy aims to cut costs by using common platforms--or the same basic underpinnings--for vehicles in more than one product line. Such a move would require redesign and departure from the new company’s vehement insistence on preserving the individuality of each partner’s output.

If DaimlerChrysler were to engage in joint manufacturing, it would be confronted by the cultural clashes of the American and German work forces and the intense pride auto workers on both sides of the Atlantic take in their products, Lubinetzki says.

“The Mercedes guys think they’re brilliant because their product is respected for its quality,” the analyst says. “But Chrysler people feel the same way about their reputation for efficiency. You put the two together, and you are going to have clashes. The biggest challenge in a merger like this is on the [production] floor. The chairmen and boards of directors can be all for it, but it eventually comes down to the work forces.”

One major difference between German and U.S. auto production is the relationship between management and labor. At DaimlerChrysler, as at all German auto makers, representatives of the powerful IG Metall labor union sit on the board of directors.

The common German industrial practice of mitbestimmung, or co-determination, seeks to head off labor disputes by involving union leadership in decisions about production. The newly constituted supervisory board of DaimlerChrysler includes a representative of the United Auto Workers.

Mixing management and labor in the boardroom may help avert trouble on the production floor, but wide fluctuations between the wages and benefits of the two work forces could introduce new disputes at the executive level. U.S. assembly line workers earn more per hour than their German counterparts, but their benefits and insurance packages often pale against those of the Europeans, who enjoy a minimum of six weeks of vacation each year, fully paid health care and education and the right to a soul-soothing spa break every three years. When it comes to the boardroom, though, U.S. executives are usually far better compensated than their German equivalents.

German executives wave off concern about the two sides’ wide variances in production costs as details unlikely to disrupt the venture. Where Daimler-Benz produces 850,000 passenger vehicles a year with about 120,000 employees, Chrysler makes 3 million with a work force of about the same size.

Different spending priorities have become clear even in the two months since the merger was completed, most obviously in corporate advertising for the new venture that has departed from Daimler’s long-standing view that it had no need to invest in goodwill.

The multimillion-dollar promotion of the new company spread the diverse visages of executives, engineers and assembly workers across the pages of the most influential European and U.S. publications, marking a clear preference for American image-marketing techniques.

One of the multi-page advertisements depicts two crash-test dummies embracing as they selflessly plunge into the work of getting demolished. Although a fatal collision may be unlikely for the two auto makers, the fact remains that most of those who have gone before them have crashed and burned.

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DaimlerChrysler at a Glance

A look at the assets of the combined DaimlerChrysler:

Headquarters: Stuttgart, Germany, and Auburn Hills, Mich.

Co-chairmen: Juergen Schrempp and Robert Eaton

Employees: 434,000

1998 combined revenue: $148 billion

1998 combined operating earnings: $7.06 billion*

Group auto sales in 1998: 4.4 million units, with Chrysler, Dodge, Plymouth and Jeep car and truck brands accounting for about 3 million units

Rank: No. 5 in worldwide vehicle sales, behind General Motors, Ford, Toyota and Volkswagen

Top sellers (U.S. market, 1998): Plymouth Voyager and Dodge Caravan minivans, Dodge Durango sport-utility vehicle, Dodge Ram pickup series, Jeep Grand Cherokee sport-utility; Mercedes-Benz E300 sedan and E20 wagon, ML320/430 sport-utility

* Estimate

Sources: Autodata Corp., company and wire service reports

Researched by JENNIFER OLDHAM / Los Angeles Times