Common Sense: Taking Up Space

The DaimlerChrysler AG merger is now more than a year old, and what we've seen is what I predicted shortly after it was first announced in a column entitled "The Ultimate Outsourcing" (see WAW - May '99, p.27).

While nearly everyone else was seeing nothing but roses - the synergism the merger would create, the exchange of talent, and economics on a grand scale - I agreed that the companies' product plans and markets more or less supplemented each other.

But I also enumerated pitfalls in the deal, underscoring that it was by no means a merger of equals: it actually was a takeover of an American company by a German company, a fact others now concede.

On the surface it looked different. Daimler-Benz AG Chairman Juergen E. Schrempp and Chrysler Chairman Robert J. Eaton were to jointly operate the organization.

This was to show that it was a merger of equals, but it was an illusion. Mr. Eaton said he'd remain for only a few years, and numerous other Chrysler executives collected millions in the transaction giving them the freedom to do whatever they wished.

Many have since left.

At the outset they had high-sounding titles, but in reality they just took up space. And many of them, including "President" Thomas T. Stallkamp, are long gone. Mr. Stallkamp was clearly backed by Mr. Eaton, so you could say his departure repudiates if not humiliates the American "co-chairman."

Mr. Stallkamp's laid-back style and belief that the Americans still retained power obviously clashed with the hard-charging Mr. Schrempp, who was and is determined to forcefully stamp the Mercedes Tristar on its American prize.

The Americans who stayed presumably were there to participate in long-term strategy. But how could they when they, by choice or fiat, were short-timers.

Mr. Eaton and his U.S. cadre in reality became lame ducks, their power and authority diminished. Their only interest now is to do whatever is necessary to increase the value of DC stock to fatten their portfolios when they leave.

Those who saw the handwriting on the wall have departed or have aligned themselves with Stuttgart. But as more German managers take over the top spots, they naturally will tend to fill subordinate positions with their own people. As a result, higher-level opportunities for Chrysler folks will shrink, and the exodus likely will continue.

Cultural differences also are tough to overcome. Take the executive dining room, for example. In Germany they serve beer and wine and their managers can enjoy a cigar after lunch. In the U.S., executives have to be satisfied with water or a Coke, and smoking is strictly verboten.

A typical large German company such as Daimler has more vice presidents than a comparable American corporation. Thus it became necessary to change the titles of numerous Chrysler managers to vice president so they could communicate on par with their German counterparts.

But the forced integration of these two systems has created a great deal of friction and insecurity, leaving many people at the "old" Chrysler wondering if they have a future in the merged organization.

Chrysler also is losing some of its heritage. The Chrysler Museum that opened recently preserves some of that history, but the people who saved the company in the '70s and '80s were not even invited to the grand opening.

Without them there would have been no Chrysler with which to merge.

I also thought that the two companies would benefit by operating separately in the early stages while managers on both sides became more familiar with each other, merging operations when it made economic sense.

It still bewilders me why it became a matter of life and death to integrate operations at such an accelerated pace. Almost immediately every Chrysler facility, plant and dealer had to change the name on their signs, logos, stationery, trucks and everything else. Yet I notice the Mercedes facilities in the U.S. didn't change to the new name - it's still the same old Mercedes.

The integration process also has created the need for a flotilla of planes to shuttle back and forth between the two countries on a daily schedule. What for?

Everything operated fairly well before the merger.

I'm not saying that integrating some departments to work on special projects - engines and transmissions come to mind - wouldn't make sense.

But it doesn't when you push decision-making to the top, and I think that's what is happening.

This stifles competition, reduces innovation, and people become frustrated and less motivated.

That's why spinoffs at some large corporations - Detroit Diesel and American Axle & Manufacturing from General Motors Corp., for example - are successful almost from the outset. Management, the labor contract, products and markets do not significantly change. What did was elimination of the stifling effect of a bloated corporate structure.

That's why it's hard to believe that DC would create such a cumbersome structure, but that's exactly what seems to be happening. To me it's extremely difficult to operate a company of this size from central headquarters.

It would make more sense to leave each business as a stand-alone, with each fully responsible for its operation and profitability. There are ways to cooperate in this type of organization where there are overlapping functions and still realize the economic benefits.