DaimlerChrysler:
Post-Merger Integration Phase
Magda Piekarska, Katarzyna Wojdyła,
Dimitri Dukarski, Michael Nagel
Table of Content
Content
1. Introduction
2. History & Key Facts
3. Facing new realities
4. Merger of Equals
5. Post-Merger Integration
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Table of Content
Content
1. Introduction
2. History & Key Facts
3. Facing new realities
4. Merger of Equals
5. Post-Merger Integration
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History of the Merger
Creating an automotive powerhouse
żð$132 billion annual revenues
żð5th largest auto maker in the world
żð428 000 employees
żðthe largest industrial merger
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M&A Facts
High failure rates in corporate mergers
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M&A Facts
Pitfalls in corporate mergers
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Daimler-Benz AG
Key facts
żðThe oldest car manufacturer in Germany
żð1980s ->Changes: diversification strategy into electronics & airplane
industry
żð1995->the largest loss
żðUS style :
Øð Mr Shareholder Value
Øðperformance related stocks
options for top management
żðProduct porfolio- 35->23
żð1990s-internationalization
of its operations
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Daimler-Benz AG & Chrysler
Timeline
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Chrysler Corporation
Key facts
żðSince 1950s - the smallest of
the American  Big 3 car manufacturers
żð1980s- close to bankruptcy
żð1993-focus on Chrysler s
core activities & on reducing
its dependence on North
American market
żð1990s-less than 10% of its
cars sold outside US
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Development in the 90s
Steering towards the merger
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Table of Content
Content
1. Introduction
2. History & Key Facts
3. Facing new realities
4. Merger of Equals
5. Post-Merger Integration
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Sales Comparison
Sales in automotive industry in 1995
No. 1. General Motors  over 8 mln units
No. 4. Volkswagen  3.8 mln units
No. 6. Chrysler  2.7 mln units
.
.
.
No. 15. Mercedez Benz  600,000 units
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Consolidation in Automotive Industry
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DaimlerChrysler case | Mergers & Acquisitions
Consolidation in Automotive Industry
żðSmaller than the competitors
żðReached a level of saturation in its niches
żðThe competitive position in threat
żðSmaller than GM and Ford
żðCompetitive pressure from players in Europe and Asia
(rapid growth and economies of scale)
żðChallenged by shareholders
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Q-Star
First joint attempt at cooperation
1994/95  first meeting (minivan contract in China)
Q-Star company:
żðJointly owned
żðDeveloped vehicles for emerging markets
żðQ-Star brand
żðFell apart
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Project Gamma
Drafting the future company
żðVery secretive at first
żðLegal structure: Daimler-Benz AG  tax advantage in Germany
żðOther delicate issues addressed the same way
1988  Daimler Chrysler merger
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A New Company is Born
Advertising the newly created DaimlerChrysler
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Table of Content
Content
1. Introduction
2. History & Key Facts
3. Facing new realities
4. Merger of Equals
5. Post-Merger Integration
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The Combined DaimlerChrysler AG
Similar size
- in profitability
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The Combined DaimlerChrysler AG
Similar size
- in relation to their product portfolios
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The Combined DaimlerChrysler AG
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Potential for this merger
" synergies in purchasing
" synergies in distribution
" synergies in research
Potential
" synergies in development
" market growth
" 1 year: approx. $ 1.4
billion
Expected
" Annual to the next 3-5
savings
years: $ 3 billion
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Different Companies, Different Cultures
Balancing the strengths & weaknesses
Daimler
Chrysler
Benz
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The Chairmen s Integration Council
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Main Goals of the Groups
żðMerger of Equals: neither  German nor  American side, don t look for
 Daimler-Benz or  Chrysler decision Ä…ðlook only to make the  RIGHT decision
żðWalk-the-talk: DaimlerChrysler top executives will set the tone for the
integration by their example and personal behavior
żðMaximum autonomy but financial performance targets must be delivered on
time
żðListen to the other side at ALL times and watch the tone-setting
żðDon t mess around and don t play games: There will be no place to hide
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Table of Content
Content
1. Introduction
2. History & Key Facts
3. Facing new realities
4. Merger of Equals
5. Post-Merger Integration
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Post Merger Integration
Developing a post merger integration strategy
żðIn April 1998 Daimler and Chrysler decided for an immediate merger
żðDecision to forego  honeymoon
period
żðIntegration was to be completed
within 3 years
żðWhy was this decision taken?
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Post Merger Integration
How to tackle the process?
żðRiding the  momentum
żðHigher risk of failure
żðPromote real, structural
due to reduced planning
Fast
changes
period
Integration
żðNo hasty decisions
żðConcentration on short-
żðTime to identify all relevant
term savings
Gradual
stakeholders
żðLoss of momentum for
Integration
rigorous changes
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Post Merger Integration
Developing a post merger integration strategy
żðcompanies formed a common team to develope PMI strategy
żð6-month time to consider all aspects
Approach to PMI
Centralized Decentralized
Integration Integration
żð Concentration on designing a żð Identification of key integration
bluebrint for the entire organization areas at the beginning
żð Bluebring serves as a basis for all żð Appointing task force leaders to
other integration efforts address major integration issues
żð Identification of suitable executives żð After the formal integration, task
to  roll out PMI plan force leaders assume formal
żð Creation of task forces to support responsibility of that area
executives in different areas
Øð Centralized leadership through top żð Decentralized leadership through
management task force leaders
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Post Merger Integration Approach
Centralized approach
Source: IMD International
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DaimlerChrysler case | Mergers & Acquisitions
Post Merger Integration Approach
Decentralized approach
Source: IMD International
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Developing a PMI Strategy
Top-Down vs. bottom-up approach
żðRequires top-class
żðClarity of design and
management
leadership
żðoverreliance on availability of
Centralized
high potentials
żðFacilitate the creation and
Integration
żðRisk of employees bypassing
development of leadership
the proposed hierarchy
żðPerception of speeding events
skills
żðTask forces good at re-
żðRisk of losing the overall
solving merger integration
Goal in discussion of details
Decentralized
issues
żðLess suitable for a strict time
Integration
żðHelpful in overcoming commun-
agenda
ication bottlenecks
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DaimlerChrysler Pyramid
Purpose, Mission, Goals, Belief
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First cracks in the pyramid
Developing a post merger integration strategy
żðBoth companies settled for a hybrid strategy, however focusing on
developing a common blueprint first
żðOfficial announcement of corporate vision
scheduled for the end of 1998
żðAround September/October analyst signaled
negative expectations for both companies
Øð Integration benefits were in doubt
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Thank you
for your attention!
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