Finally Merger of Equals

The news was swift and inevitable. DaimerChrysler is putting its house in order, with the concentration on the Mercedes division.

The consensus for the past couple years is the luxury car division is bloated, especially when compared with Chrysler, its lean U.S. cousin.

When former DC Chairman Juergen Schrempp decreed that Chrysler needed drastic cuts and restructuring in 2000, he tapped his sales and marketing chief, Dieter Zetsche, to travel to hostile territory and do what Schrempp felt the North Americans were unable to do themselves.

Zetsche was more than equal to the task, cutting material costs, closing plants and eliminating more than 26,000 jobs, while bolstering the product lineup.

His reward: Zetsche replaced Schrempp as chairman at the start of the year, in addition to duties as Mercedes chief that he assumed last fall.

Now Zetsche is beginning to make the drastic cuts that Mercedes needs €“ ones German executives were unable to do themselves.

The majority of the 6,000 jobs being cut are in Germany. The European headquarters is moving closer to its manufacturing base in Unterteurkheim and the management board is being pared to nine from 12 members.

The management structure changes are expected to reduce general and administrative costs by $1 billion ($1.2 million).

The streamlining also takes bold steps in merging Mercedes and Chrysler in a way the old German guard was reluctant to pursue.

Corporate-wide research and technology and Mercedes product development combine to form a new entity, Group Research and MCG (for Mercedes Car Group) Development.

This new body not only will serve as the research center for the whole company, but will be responsible for advanced engineering for all automotive divisions, including Chrysler, Freightliner and Smart.

Brand identities will be preserved, Zetsche promises.

In his first month on the job, the new chairman has put the machinery in place to repeat past collaborative successes such as equipping the Chrysler 300 Series with Mercedes’ rear-wheel-drive transmission.

Zetsche knows firsthand the win-win result of the sharing and is institutionalizing his broader vision to spur more.

There was a time when news the German parent was folding Chrysler engineering into Mercedes’ development program would have been grounds for revolt in Auburn Hills. Memories still are fresh of Schrempp’s ill-fated comments suggesting the merger was never meant to be one of equals and the ultimate plan was to reduce Chrysler to a standalone division.

But Zetsche left the North American arm with trust that he understands its importance and not only will safeguard Chrysler’s interests and autonomy, but root for it.

And in tackling bloat at Mercedes, he shows no favoritism for the luxury division.

Early signs suggest the best interests of DaimlerChrysler as a whole truly are the new chairman’s top priority.

More than seven years later, the merger is showing signs it still may be possible to achieve the lofty goals and pursue the seemingly infinite possibilities foreseen in 1998.

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