DaimierChrysler Case Study

Introduction
The merger between Chrysler Corporation and Daimler-Benz to form
DaimlerChrysler was considered a cross-culture merger. The majority of
mergers are unsuccessful. In DaimlerChryslers case, the clash of culture and
horizontal and vertical integration was too much to handle. The prominent
reason as to why the merger was unsuccessful was because the American
and German approach to business differed immensely.
Case Questions
1. In response to Schrempp, Stallkamp had two options. First, Stallkamp
could have listened to Schrempp and circumvented Eaton in making the
decisions. Stallkamp would have to consider the options of the negative
effect that this would have on Stallkamp and Eatons relationship.
Furthermore, Stallkamp would have to consider the negative effect that-that
decision would have on the entire DaimlerChrysler Company as whole. The
decision to circumvent Eaton would speak volumes about the integrity of the
process especially among employees. Second, Stallkamp could have brought
this to Eatons attention that Schrempp encouraged Stallkamp to go behind
Eatons back. Stallkamp would have to consider the options that this
backlash would have on the Daimler-Benz and Chrysler merger. According to
the case, it can be assumed that Schrempp is a very volatile, and easily
angered individual who takes offense to everything. Schrempp could become
enraged and come to the conclusion that Stallkamp and Eaton were
ganging on him.
I recommend that Stallkamp take a completely different option and try to
build a stronger, more integrated relationship between Schrempp, Stallkamp,
and Eaton. It is clear that the underlying issue between these three leaders is
the lack of communication. According to the case, Schrempp and Eaton have
spent less than a few days together with face-to-face communication. All
communication priors have been done through other executives. I believe
that if communication were stronger between these leaders then that would
lead to an improvement in leader cohesion and integration. Stallkamp could
even go one step further and arrange consistent team building exercises for
the whole company where participation was mandatory on all levels of the
organization. Studies have been shown that the more time a team spends
together, the higher the output.
2. The differing leadership styles of the three DaimlerChrysler leaders
created the issues of incoherence, which ultimately affected the cohesion of
every level within the organization. Normally, leaders within an organization
that have different leadership styles complement each other welllike Steve

Jobs and Tim Cook. However, the difference in the three DaimlerChrysler
leaders was too great to the point that it was a disadvantage.
Stallkamp, Schrempp, and Eaton all had their own distinct leadership style.
Stallkamp was the president of Chrysler. Stallkamp had an easy manner
mixed with a wry sense of humor. He is attributed as having a small ego with
a self-effacing attitude. Schrempp was the chairman of Daimler-Benz.
Schrempp is attributed as having a no-nonsense big ego, as well as being
ruthless and arrogant. Eaton was the chairman of Chrysler. Eaton was
considered to be one of the more modest chief executives in the world, a
mild mannered and even-tempered man who believed in the power of teams.
Eatons demure, less forceful manner was a significant departure from
Schrempps style. Eaton had a solid self-worth without being on an ego trip.
Eaton approached problems in a direct, straightforward manner and sought
the advice of his management team. In contrast to Schrempp, who often
went rogue when making decisions.
The first solution that I recommend to overcome the organization challenges
is the complete preparation of assigned roles as well as expectations from
top management well before the merger between Chrysler and Daimler-Benz
is completed. As seen in the case, a major issue was the power struggle
among management and top executives. Thats why it is in every companys
best interest to determine leadership before mergers are set in stone.
Addressing the question of leadership after a merger is difficult because selfinterest usually triumphs what is needed for the greater good of the
company as a whole. Furthermore, upon addressing the question of
leadership, both companies must discuss the expectations and norms of
DaimlerChrysler as a whole. For instance, there was a major difference in
norms and values between both the companies as seen in the case.
The second solution that I recommend to overcome the organization
challenges is to do a complete assessment of the compatibility between the
two companies to determine the extent to which the culture clash would
occur. A diagnosis of the current and future state of the two companies is
important because it would allow all employees from both side of the
organization to weight their options. Additionally, it would allow all
employees to be on the same page in every aspect of the integration. If the
assessment shows that the two corporate cultures are not compatible, the
two companies can determine the necessary course of action that needs to
be taken to accommodate the two companies, and whether or not it is worth
the effort. Again, this all must be done before the actual merger takes place.
3. As previously stated, the prominent reason as to why the integration of
Chrysler and Daimler-Benz was unsuccessful was due to a clash of culture
between the two auto companies. Regardless of all efforts to create synergy

between the two corporate cultures, DaimlerChryslers management failed in

integrating the two companies.
The differing cultures between the two conflicted across all platforms of
operations. The major difference between the two companies was the
decision making process and the company structure. The Germans method
was systematicthey believed in a suit-and-tie policy dress code and respect
for titles and proper names. On the other hand, the Americans method was
very open and unstructuredthey believed in cross-functional teams that
favored open collars, and casual repartee. The Germans work structure was
more authoritative and bureaucratic with 23 business units. Whereas, the
Americans work structure had a matrix management and platform teams
that operated in essence as a single strategic business unit. Another
difference that is noteworthy to mention is the importance of reputation
between the Germans and the Americans. At Daimler-Benz, all employees
always flew first-class in keeping up with the companys luxury image,
whereas at Chrysler only the top officers could fly first-class.
Ultimately, the cultural differences between the two companies hindered
their ability to achieve the benefits and savings from the merger. The
advantages that both Chrysler and Daimler-Benz could have benefited from a
success merger were outstanding. Shared benefits included: $1.4 billion in
pretax cost savings in 1999 ($3 billion in 2001,) purchasing powerrelationships with suppliers, better capacity utilization, shared R&D
innovation, financial strength to enter emerging markets, shared systems,
and a full product line from small to luxury.