Daimler Chrysler: Post Merger Issues

Mergers of Equals
Daimler Chrysler is a case of a failed merger between two successful companies even though on
paper it might be termed as Mergers of Equals. Because none of the firms was acquired by the other
and a new company was formed, it was considered a merger of equals. But practically it did not prove
to be a merger of equals.
Following points explain why the merger between Daimler and Chrysler never worked out in real
sense:-
There were lot of cultural issues which were not taken care in the due diligence process of
Mergers

Daimler Chrysler
Decision making Methodical Encouraged
Creativity
Values Authority,
Bureaucracy and
Centralized decision
making.
Efficiency,
Empowerment,
Equal rights
Compensation
Structure
Low salaries Generous pay
packages- twice of
Daimler
Working methods Lot of red tape
Long reports and
discussions
No red tape
Minimum reports
Organizational
Structure
Pronounced
hierarchies
Top-down-
management
Flat hierarchies
Approach to solution Detailed plans and
implementation
Shoot then Aim

Leadership Effectiveness
o There was lack of management control between the two companies. A lot of
executives left Chrysler post-merger that lead to management of Daimler having an
upper hand in resolution of issues.
o A concerted approach could be, to have the leaders partner to ensure adequate span of
management control between the two companies to avoid the wrong message sent out
to the employee base. Chryslers leadership should have not taken the back seat in the
newly merged company
Communications
o The cultural issues as well as the uncertainty within the workforce due to the merger
could have been reduced through proper communication.
o Daimler-Chrysler should have taken the necessary steps to communicate and train
people on the new communication styles (German vs. American) that were to be used
going forward.
o An iteratively deployed and adaptive process would have made more sense than to
trying either to keep the autonomy or to force one very different culture upon another.
o The company should have created a transition team that is specifically focused on
determining the communication gaps that exist between each company hence easing
out the process of change management.
o In the centralized-decentralized structure that they instituted, Schrempp should have
cut headcount on the management layer, and removed more of the bureaucracy and
red tape, rather than adding to it. Manpower reduction always consisted of the
workforce and not the management.
Retention
o Another post-merger issue was top management turnover. Retention efforts should
have been made especially to retain top leadership of the Chrysler.
o Schrempp could have mitigated the retention issues by taking better steps to enact a
retention plan which could have included elements such as stay pay and a new
bonus strategy (retention bonus), based on milestones of the merger.
o Designing a mentoring program for all employees would have helped solve issues
related to attrition.
o Develop a formal plan or roadmap, to get to where DaimlerChrysler needs to be
o Reward systems of each legacy company should be examined pre-merger to
determine areas where significant gaps or potential areas of conflict may occur.

If these change management process had been proactively taken then it would have created the
required synergy between the two companies and the problem wouldnt have arisen.