Final Exam DD Hue University

The (unsuccessful) merger of Daimler-Benz and Chrysler Corporation

Instructions

Please explain how you would have conducted a thorough due diligence using the (unsuccessful) example of merger of Daimler Benz and Chrysler Corporation.

1. Point out the areas/issues that should have been covered or should have been covered more thoroughly during the due diligence process. 2. Briefly explain why you deem those areas/issues important for the business transaction at hand. 3. For each area/point make up a maximum of 10 structured and relevant questions that should have been asked during the due diligence process in order to avoid the eventually dissatisfactory outcome.

Demonstrate your understanding of due diligence by utilizing the PPP used for and during the lecture, your personal notes, the hand out Gordon Bing, Due Diligence Planning, Questions, Issues and other documents or notes you deem relevant laptops, phones or other electronic devices are NOT permitted.

Start in 1998
In 1998, Daimler-Benz and U.S. based Chrysler Corporation, two leading global car manufacturers, agreed to combine their businesses in what was perceived to be a merger of equals. Jurgen Schrempp, CEO of Daimler-Benz and Robert Eaton, Chairman and CEO of Chrysler Corporation met to discuss the possible merger. The nine-year, $36 billion "merger" of Chrysler and Daimler-Benz was dissolved Tuesday for a mere $7.4 billion. The merged entity ranked third (after GM and Ford) in the world in terms of revenues, market capitalization and earnings, and fifth (after GM, Ford, Toyota and Volkswagen) in the number of units (passenger-cars and commercial vehicles combined) sold. In 1998, co-chairmen and co-CEOs, Schrempp and Eaton led the merged company to revenues of $155.3 billion and sold 4 million cars and trucks. But in 2000, it suffered third quarter losses of more than half a billion dollars, and projections of even higher losses in the fourth quarter and into 2001. In early 2001, the merged company announced that it would slash 26,000 jobs at its ailing Chrysler division. Objective To restore Chrysler "to the first ranks of the U.S. and global auto industry," Failed Analysts felt that though strategically, the merger made good business sense. But contrasting cultures and management styles hindered the realization of the synergies. Daimler-Benz attempted to run Chrysler USA operations in the same way as it would run its German operations. Daimler-Benz was characterized by methodical decisionmaking. On the other hand, the US based Chrysler encouraged creativity. While

Chrysler represented American adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more traditional respect for hierarchy and centralized decision-making.