Sucesses and Damages of Mergers in the Motor Industry

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 s...

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... expertise. DaimlerChrysler would be a major auto giant that could face brutal competition from Japanese, German and US automakers as a combined entity aimed at attaining economics of scale that would reduce costs. Chrysler brought to the table their creative styling and low development costs. Quick, cheap and lean was the reputation they had built for themselves. Daimler had higher developmental costs. And last but not least, the vast global distribution network Daimler had come second to none, which could be leveraged by Chrysler. The fact that these two companies did not have a concrete plan on how to merge together despite their differences resulted in a failed merge. If more emphasis was put on the cultural discrepancies, organizational structure and management techniques the merger would have stemmed in putting Daimler-Chrysler at the top of the car industry.