Chrysler: Who Took Whom for A Ride?

May 14, 2007
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Some years back, my old friend, Bill Vlasic, collaborated on an excellent book about the behind-the-scenes machinations that led to that, ahem, “merger of equals,” DaimlerChrysler. The bottom line of that effort, Taken for a Ride, was that the skillful and Machiavellian maneuvers of former Daimler CEO Juergen Schempp simply overwhelmed his less-than-brilliant counterpart, Chrysler Chairman Bob Eaton.

There’s little doubt that Eaton was in over his head and may have simply wanted to ink a deal, no matter how lopsided. But in the wake of today’s news, with DCX all but giving its U.S. subsidiary away to the private investment group Cerberus, one has to wonder who really took whom for a ride.

The likely answer is that neither Daimler, through Schrempp, nor Chrysler and Eaton, had a clue what they were getting into. One man’s Napoleonic grand vision, the other’s insecurities and limited scope, led to the creation of an entity that never could and never would coalesce into the grand, trend-setting global entity that we were promised.

A big part of the problem can be found in Germany. There was a reason Schrempp used to refer to his own corporate headquarters as the “bullshit palace.” And he wasn’t even referring to corporate press releases. The problem is that the folks in Stuttgart believed their own BS. Worse, they had a hugely inflated sense of self – easy to understand, I guess, when you’re building the benchmark luxury brand – and never really valued what they had with Chrysler. The resentment was palpable and as a result, the trans-Atlantic maker never really came close to achieving the potential synergies it needed to justify the takeover.

Chrysler had its own issues and made mistake after mistake, notably continuing to build vehicles that far too few customers wanted to buy – then dumping them into storage lots and, ultimately, loss-making fleets. The U.S. automaker destroyed its own brand, further justifying the scorn of its German sibling.

It will be interesting to see what happens now, with the renamed Daimler AG maintaining a 19.9-percent stake in Chrysler. It would be ironic if it now treats the U.S. brand as a valuable investment and takes the steps necessary to make that pay off – perhaps sharing more of its parts, technology and even platforms.

When Schrempp and Eaton jointly rang the opening bell at the New York Stock Exchange in November 1998, they insisted their new entity would be a role model for the rest of the industry, perhaps for business, in general. In a sense, they were right. The dissolution of this trans-Atlantic marriage shows exactly how a mix of hubris and self-delusion can lead to some incredibly bad decisions. And now, in the breakup’s wake, it’s the acquisition by Cerberus that may be the real sign of things to come.

Daimler Kills "Merger of Equals" With Chrysler—

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