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Sucesses And Damages Of Mergers In The Motor Industry

1818 words - 8 pages

Over the past decade, the motor industry has faced many of mergers between companies in the bid to get more clients and internationalize their market share. The well planned mergers have arguably led to relative success while those that might have omitted some vital factor have had to contend with the pain of getting into damaging losses.

A merger happens when two companies decide to combine into one entity or when one company acquires another. One plus one makes three: this equation is the special outcome of a merger or an acquisition. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind merging. A merger can also happen when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place.

For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created.

Faced with challenges on the car market and according to the slogan “what we do not accomplish alone, we will then accomplish together”, Daimler-Benz and the Chrysler Corporation decided to merge in 1998, with the stated aim to generate the greatest collaboration effects possible. The two companies were thought to complement each other. The strengths of one of the partners were supposed to balance the weaknesses of the other partner in order to overtake their competitors.

At the time, the merger of Daimler-Benz and Chrysler was unequalled in size and involved high risks. The reason Benz and Chrysler merging was not successful as projected was because of the cultural clashes, organizational structure and mismanagement.

Daimler-Benz

The well-known German car manufacturer Daimler-Benz was founded in 1926, when Benz & Cie merged. Since the beginning, Daimler-Benz was a well-established company in the German car industry. The name Daimler-Benz stands for precision and German high-quality products.
Although it had success in Germany and Europe, the company never succeeded in getting ahead of the competition in the vast U.S. market. Prior to the merger with the Chrysler Corporation, Daimler-Benz’ market share of the U.S. market was less than 1%. The high labor force during its production processes did not allow Daimler-Benz to become competitive in the American market.

Chrysler Corporation

In contrast the Chrysler Corporation used to be a well-established and firmly positioned organization in the U.S. market. Chrysler succeeded in producing car models that responded to the American demand. In 1997, Chrysler’s market share of the American car industry was about 23%.

Consequently, from the point of view of Daimler-Benz, the merger with Chrysler seemed very promising and the company hoped to gain a dynamic competitive advantage....

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