DaimlerChrysler Essay

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DaimlerChrysler  was the name of the entity created by the 1998 merger of two of the most storied names in automotive  history,  the  Chrysler  Corporation of the United States and the Daimler-Benz AG of Germany. This was the first major merger of an American and a German auto firm, and was valued at the time at $36 billion. The companies had co-headquarters, one in Auburn Hills, Michigan, and the other in Stuttgart. During its existence, it was the fifth-largest automobile company, by vehicle production,  in the world.

Chrysler, a company created by auto industry legend  Walter  Chrysler  in 1925, had, since the  1960s, been the third  of America’s Big Three auto makers, continually  lagging behind  General  Motors  and the Ford Motor Company. After a near-bankruptcy in the late 1970s, the company bounced back spectacularly under the leadership of president Lee Iacocca. Iacocca introduced new products  such as the K-Car and the minivan   and   secured   government-backed   loans during  the company’s darkest  period. By the 1990s, Chrysler’s successes in the marketplace,  particularly with its minivans, large trucks, and Jeep brand, had made the company a lucrative proposition.

Daimler-Benz AG, Germany’s most famous brand, had been created in 1926 by the merger of the Daimler and Benz companies, two of the most important and innovative firms in the worldwide motor  industry. After World War II, Daimler Benz reclaimed its place among  the leading German  firms by focusing upon quality and luxury vehicles, such as its flagship nameplate,  the  Mercedes  Benz. While  it remained among  the  most  popular  brands  in Europe,  by the 1980s and 1990s, the company was keen to expand its market share, particularly in the largest car market in the world, the United States.

In 1998, following a series of highly secret  meetings, the two companies announced  what they called a merger of equals. There were to be co-CEOs, German Jürgen Schrempp and American Robert Eaton, equally sharing  decision  making. The announcement of the merger was met with skepticism in many quarters, as some observers  saw the  coupling  as ill-fitting, given Daimler  Benz’s focus on luxury, while Chrysler  was known for its big trucks. Some saw this as a strength, and believed the two companies would present a synergy for the new company. Others  saw it as another example of America’s  corporations being taken  over by foreigners. Still others felt that the $36 billion that Daimler-Benz paid for Chrysler was far too high.

Initially, there was some success. The two companies shared some technology, and Chrysler’s quality improved through its association with Daimler. However, within a few years, it was clear that the decisions for the company were all being made in Germany, even for the Chrysler unit. Eaton stepped  down in 2000, leaving Schrempp as the sole executive. The Chrysler unit’s chief executive was a German, Dieter Zetsche, and only a few products  emerged from direct cooperation  between the two entities, such as the sporty Chrysler Crossfire.

Soon, many  in Germany,  especially in the  automotive  press,  were  unhappy  about  the  erosion  of the  Daimler  brand  and valuation. Many Americans were also unhappy,  feeling that  instead  of a merger of equals,  the  transaction   was actually  a takeover. There were court  cases over the merger by some of Chrysler’s main investors, which further drove down the value of the company. After 1998 a general downturn in the American market, coupled with high gas prices, meant that the success that Chrysler had experienced in selling large trucks and sport-utility  vehicles was coming to an end. Its market  share, which reached nearly 14 percent in the mid-1990s, declined to under 10 percent by the mid-2000s. The company’s stock slowly declined.

Given these difficulties, in 2007 Daimler announced that it was selling 80 percent of Chrysler to an American  private  equity  firm, Cerebrus,  for  $7.4 billion. Daimler would maintain  a 19.9 percent  share of the company and also assume one-fifth of the company’s outstanding pension obligations to workers. Daimler also promised to invest $1.7 billion in Chrysler. In the end, the merger of these two companies was a failure. With the de-merger  of the two companies, DaimlerBenz was renamed Daimler AG, while Chrysler took the name Chrysler LLC. Chrysler is a privately held company,  while  Daimler  AG  is a  public  company traded extensively in Europe and the United States.



  1. Vincent Curcio,  Chrysler:  The  Life  and Times of an Automotive  Genius (Oxford University Press, 2005);
  2. Charles K. Hyde, Riding The Roller Coaster: A History of the Chrysler Corporation (Wayne State University Press, 2003);
  3. Arnd Klein and Helmut Krcmar, “DCXNET: E-transformation at DaimlerChrysler,” Journal of Information Technology (v.21/1, 2006);
  4. Doron P. Levin, Behind the Wheel At Chrysler (Harcourt Brace & Company, 1995);
  5. Bill Vlasic and Bradley A. Stertz, Taken for a Ride: How Daimler-Benz Drove Off with Chrysler (HarperCollins,  2001);
  6. David Waller, Wheels on Fire: The Amazing Inside Story of the Daimler Chrysler Merger (McCarthur and Co., 2001).

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