DaimlerChrysler Merger A Fiasco

It was supposed to be a perfect union of carmakers.

When the two companies merged in 1998, Daimler Chairman Juergen Schrempp promised a "merger of equals." But it wasn't long before Chrysler executives complained the bullheaded Germans wouldn't listen to the Americans.

"We don't demand things of people; we seek people's cooperation," says Gerald Meyers, former chairman of American Motors and now a professor at the University of Michigan business school. "These two cultures were therefore bound to collide."

And collide they did.

Americans Feel Deceived

From the beginning, the high command in Stuttgart issued orders to Detroit about everything from where the headquarters would be located (Germany) to what kind of business cards would be used.

The relationship began to fall apart quickly. Since the merger, the company has lost nearly half its value. Somebody had to go, and it was the Americans. Daimler eventually sent in a German management team.

Schremp's promise of a "merger of equals" had been fiction, and he even admits as much. He told the Financial Times that if he had been honest with the Americans about German dominance before the merger, they never would have made a deal.

So what was the reaction at Chrysler?

"One of people who'd been deceived," says Meyers. "People who'd been hoodwinked. This wasn't just a small, a small decision. This was just plain dishonest."

The two cultures had never been compatible. Take the Daimler annual meeting, where stockholders are fed sausages and dumplings. In Germany, there's more attention paid to wining and dining the shareholders than to giving them precise information.

That's the reason Kirk Kerkorian, Chrysler's largest shareholder, sued Daimler for $9 billion, charging fraud.

"Apparently in Germany, one can say pretty much whatever one wants to the shareholders of a company," says Terry Christensen, Kerkorian's lawyer. "Here in the United States, what you say to the shareholders has to be true."

Dejected Employees

All of this has demoralized Chrysler's workers.

"Most of them are disgusted and frustrated because they seem like they have been shafted," says one.

The rank and file now expects big layoffs, and they worry the company will be sold. Schrempp insists that isn't true, but few of the Americans he has dealt with are willing to take him at his word a second time.

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