DaimlerChrysler merger, Business, College Term Papers.com


		Data Bases
		• Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism?

		Links
		• Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com

		Free Essays
		• Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers

Search Lots of Essays

Back to Subjects - Business

DaimlerChrysler merger

DaimlerChrysler merger Daimler Chrysler is the result of merging Daimler-Benz and the Chrysler Corporation in late 1998. The merger was to be one of the largest on record, and the beginning of a new wave of mergers sweeping through the automotive industry. Although the companies were manufacturing generally similar products, the differences between those products could not be wider. Chrysler was known for a product line consisting of mini-vans, light duty trucks, and four-wheel drive off-road vehicles; Daimler-Benz was known for its luxury brand of Mercedes-Benz vehicles and medium and heavy-duty over-the-road trucks. Merging the two companies entertained the idea of one entity possessing a product line covering nearly every type of wheeled vehicle. Daimler Chrysler’s strategy was to maintain separate brands and images, following its internal book, “Guidelines for Daimler Chrysler Brand Management.” This book outlined a strategy consistent with a clear separation of Mercedes-Benz and Chrysler brands. No sharing of common platforms, factories, or dealership networks was allowed. In effect, the two companies were to be run as separate entities; even the headquarters were to remain separate. It would appear a strategy consistent with these goals would severely limit any anticipated synergies of the merger. Upon completion of the merger, an industry wide overcapacity existed, and economic conditions suggested a further slowdown in auto sales on the horizon. Medium and heavy-duty truck sales were slowing down, Mercedes-Benz was facing stiff competition from the luxury Japanese car market, Chrysler was experiencing lackluster sales, and clearly, costs needed to be cut. The result was Daimler Chrysler’s announced layoffs of 26,000 employees and the idling of several assembly plants in North America. It became apparent to those outside the organization that the merger was more of a takeover by Daimler-Benz than a “merger of equals.” Clearly, Daimler-Benz emerged as the leading entity and named many of its executives to the board of directors. Chrysler’s management took a back seat, and the former Chrysler CEO was given a lesser role in the new organization. Since the completion of the merger, Daimler Chrysler stock (DCX) has suffered over a 55% decline. The fundamentals of the company trail its rivals in nearly every category. Daimler Chrysler’s net profit margin of 1.5% lags both that of Ford, at 2.0%, and GM, at 2.4%. Revenues have increased sequentially more than that of rivals GM and Ford, but gross margin, 16.98% lags both GM, 20.07%, and Ford, 20.24%. Return on Equity, 5.8%, lags Ford’s 18.6%, and GM’s 14.8%. Return on Investment, 2.01%, trails the industry average of 2.91%. Return on Assets, 1.2%, is in line with GM and Ford, 1.5% and 1.2%, respectively. Market Value Added was over €65B for FY ’98, dropped to €42B in FY ’99, and by FY ’00 was (€1.2B). Management performance overview DCX Ford GMGross Margin 16.98% 20.24% 20.07%LT Debt/Equity ratio 2.0 8.88 4.72ROE 5.8% 18.6% 14.8%ROI 2.01% 2.91% 2.93%ROA 1.2% 1.2% 1.5%Net Margin 1.5% 2.0% 2.4% The Chrysler division continues to suffer from the weak North American economy. In response to weak sales, tough economic conditions, and lagging fiscal performance, Daimler Chrysler asked suppliers for one-time 5% cost reductions. Although synergies are anticipated to reduce costs by €3B over the next 2-4 years, it seems more could be done. The “bible” could be revised to realize engineering synergies between the divisions without degrading the brand recognition of Mercedes-Benz. The result could be a decreased “lead time,” and higher quality products on the Chrysler side. Some common platforms could be utilized, matching the highest-line Chrysler products with the lowest-line Mercedes-Benz products, thereby decreasing production costs while maintaining quality. Since SUV’s represent products produced by both the Chrysler and Mercedes-Benz lines, some common drive trains and assembly plants could be utilized. Further savings could result by combining administrative centers, and closing Chrysler’s Auburn Hills, MI headquarters. Daimler Chrysler has several advantages from which it could benefit. Modern, up-to-date factories exist in both Europe and North America, unparalleled brand recognition exists with the Mercedes-Benz line, and the corporation has a significant market share in the over-the-road truck market. Strategic purchases in the latter market have further solidified Daimler Chrysler’s advantages. Daimler Chrysler recently purchased Detroit Diesel, a heavy-duty diesel engine manufacturer, and Western Star, a heavy-duty truck manufacturer, to complement its Freightliner and Sterling brands. To increase its presence in the Asian market, Daimler Chrysler purchased a 34% stake in Mitsubishi Motors Corporation (MMC), and purchased Volvo’s 3.4% stake of Mitsubishi Heavy Industries. Daimler Chrysler now has the arduous task of properly melding these mergers and acquisitions to realize the potential synergies. The German engineering facilities produce top-notch designs, which can be used throughout the organization. The many modern factories can be quickly modified, via assembly modules, to adapt to changes in manufacturing designs, while the older plants can be closed to reduce overcapacity and cut production costs. The American body design studios can be utilized to produce across-the- board designs, and strategic alliances with MMC and Hyundai should allow rapid penetration in the Asian market. The potential synergies, if realized, should allow increased production efficiencies while reducing costs. New product lead-time could be diminished sequentially, allowing an advantage over the competition, while incorporating Daimler-Benz’s engineering facilities with Chrysler should increase Chrysler’s perceived quality without sacrificing Mercedes-Benz’s brand image. Of late, the stock price has suffered more than its peers as investors recognize the lack of synergy if the entities are not combined in at least some capacity. Combining at least some portions of engineering, design, and manufacturing should be attempted, at least on an experimental basis, if any synergies are to be realized. Merging and acquiring companies without exploiting their comparative advantages offers little or no advantages. If Daimler Chrysler is to prosper in this very competitive industry, it should explore all potential comparative and strategic advantages to minimize costs while sharing its core competencies throughout the organization to increase market share and brand recognition. Bibliography:

Word Count: 1609