Co-chairmen Bob Eaton and Juergen Schrempp have said they may use some of their cash hoard to buy another company. A decision to take a stake in Nissan Diesel, Nissan Motor Co.'s heavy-truck unit, is due in December.
The group heard pitches last week for its consolidated global media business. No decision has been made on whether media accounts will be consolidated on a global basis or by continent. Daimler-Benz and the former Chrysler Corp. spent $1.78 billion on advertising last year, say industry sources.
A three-week global corporate advertising campaign began 17 November. Its slogan is 'Expect the extraordinary.' Close-up, black and white portraits are used to single out employees who have the qualities DaimlerChrysler wants to be known for. The photos were taken by famed portrait photographer Richard Avedon. The estimated $20 million campaign is running in newspapers and magazines and direct mail.
The group wants to become stronger in the region. 'We are talking about a four-door, 4.5 meter car for the Asian market, priced at $7,000,' said Eckhard Cordes, head of strategy. 'Daimler and Chrysler don't have that.'
Mercedes-Benz, Smart and Chrysler brands will have separate and distinct showrooms in Europe. In the US, Chrysler has most of its brands in combined showrooms - they've encouraged dealers to combine brands. Schrempp said: 'Our people some weeks ago precisely spelled out the identity of every brand in terms of costs, customer focus, customer segment, competitive environment, technological content and quality.'
Chrysler's plant in Windsor, Ontario, Canada, may be the second plant chosen for mixed production. Chrysler builds minivans there and the Mercedes M-class may eventually be added. Chrysler's plant in Graz, Austria, will make the M-class beginning next year.
DaimlerChrysler has $19.4 billion.
The group may build minivans in China, reviving a project that both Chrysler and Daimler-Benz tried separately to achieve. In 1995, Chrysler lost out to Daimler in a bid to win a Chinese government mandate to build minivans in southern China. Chrysler was unwilling to meet China's demands for technology transfers. Daimler later abandoned the project as well.
Eaton will collect $70 million in cash and stock with the completion of the merger. That dwarfs Schrempp's pay. Daimler-Benz introduced stock options in 1996. The original plan was intended for 170 senior executives, but Daimler expanded it last year to include 1,600. Schrempp, who is thought to earn $1 million to $1.5 million a year, plus stock options, says the pay issue is complicated, but not insurmountable. In most German companies, more than 50 percent of annual income is fixed, said Cordes. 'In the USA, it is much lower than 50 percent, more often 25 to 30 percent. It is highly probable that we will choose an American approach, with relatively low fixed income and several variable elements.'
Chrysler has adopted the darker Mercedes-Benz shade of blue for its pentastar logo.
Chrysler and Daimler may exchange designers, but will keep separate design identities. Chrysler might establish its own European design studio. There are no plans to name a single chief designer for the group.
Daimler will take the lead. Chrysler light trucks could be equipped with Daimler-built diesels in global markets.
Back office and logistics will be consolidated where possible.
The USA is ahead of Europe in promoting women and non-whites into the highest corporate levels. 'I don't think there is that same kind of commitment in Europe,' said Eaton. 'Will there be a problem, for example, integrating a black woman into the organization? Definitely not. We've finalized the diversity statement for the new company.'
German law does not allow payment of a quarterly dividend. But the new company wants its shares to be attractive to former Chrysler shareholders and other American investors. German companies traditionally pay lower annual dividends than Americans - Chrysler shareholders were used to dividends about triple the size of their Daimler-Benz counterparts. DaimlerChrysler will pay a higher dividend than German companies typically pay. The dividend will likely come in the form of a one-time payment made in late February or early March. 'We couldn't have convinced Chrysler shareholders to swap into DaimlerChrysler shares if you would not by and large follow a dividend policy of the previous Chrysler,' said Schrempp.
Chrysler's existing electric-minivan program will be kept and Daimler's EV work dropped.
'We need something below the Neon to be an entry level in emerging markets, something in the 1-liter class or less,' said Eaton. 'We're starting to think about ways to do that.'
Former Daimler CFO Manfred Gentz is chief financial officer. He'll be based in Stuttgart, but the company will still have two financial centers. Thomas Capo is treasurer for DaimlerChrysler's North American region and Paul Wick has the same job in Europe. Both report to Gentz. Automotive finance arms of the two pre-merger companies - Chrysler Financial and Debis Financial Services - will likely become one. But the finance companies' brands will remain unchanged. Gentz's accountants must put together pro forma balance sheets and profit and loss statements before the end of the year. The statements must cover not only 1998, but the two preceding years.
Daimler-Benz has a cutting-edge joint venture with Ford Motor Co. and Ballard Power Systems of Canada, so Chrysler has suspended its fuel-cell research.
Schrempp is good at it. When told a few years ago that he was entering a snake-pit at Daimler-Benz headquarters, he snapped, 'I am king of the snakes.' He has pushed aside several executives, including many he claimed to like and admire - like Helmut Werner. Eaton is renowned for getting along with potential foes, including Bob Lutz, Kirk Kerkorian and Opel development chief Fritz Loehr when Eaton was head of GM Europe. The real wars may be at the levels immediately below the co-chairmen.
English is the official language at management board meetings. But supervisory board meetings will be in German with simultaneous translation.
The 18-member board is a starting structure, with sales, marketing and development separated for both companies. But some responsibilities are expected to eventually be combined and the board consolidated.
There will be no common platform, but Chrysler engineers will help develop a Mercedes minivan that could share some components. A decision on the luxury minivan is expected by year-end.
Eaton wanted Chrysler-Daimler-Benz; Schrempp pushed for Daimler-Benz-Chrysler. In a compromise, Daimler came first in the sequence, but Schrempp gave up 'Benz.' The former Chrysler Corp. unit is now DaimlerChrysler Corp. 'Daimler-Benz' or 'Mercedes-Benz' do not exist.
No platforms will be shared. Executives fear it could dilute brand images.
Combined net earnings were $4.4 billion last year. Chrysler accounted for two-thirds of that. This year analysts expect earnings to exceed $6 billion and to rise to $8 billion in 1999.
First area to be integrated. Former Chrysler Chief Finance Officer Gary Valade is responsible as Chrysler takes the lead with its 'Extended Enterprise' supply chain management system. Daimler's suppliers will be introduced to the Chrysler cost-reduction program, called SCORE. Chrysler suppliers will join the Daimler technology-sharing program called Tandem. Under SCORE, suppliers seek ways to cut costs up to 5 percent annually. With Tandem, suppliers share innovations with each other and with the automaker.
DaimlerChrysler is the world's third largest auto company based on 1997 revenues of $132 billion. Analysts expect sales of more than $150 billion in 1999. Unit sales volume of 4 million last year ranked fifth in the world.
Daimler-Benz executives will have more direct input to the top than Chrysler executives. German members of the management board will report to Schrempp and Eaton. Most of the American board members will report to Tom Stallkamp, president of the American arm.
DaimlerChrysler has vowed to save at least $1.4 billion in 1999 through synergies, including $500 million from the combined purchase of parts and raw materials. Savings of $3 billion within two to three years are planned. In May, Eaton and Schrempp said the forecasts were conservative. Now they say they may be difficult to achieve. For one thing, the expected surge in Chrysler sales outside the USA may have been illusory.
Speed of the merger
The partners studied 50 corporate mergers to learn the pitfalls of joining two giants. They concluded that speed was essential. 'If you don't make the best of the first 12 to 24 months, you leave yourself open to the risk of big trouble,' Schrempp said. 'You need to show results quickly to convince people it was a good idea.'
The former Chrysler Corp. president is the closest thing to a chief operating officer. 'He's got a huge, huge, huge responsibility,' said Eaton.
Stallkamp is head of the six-member chairman's integration council. Blending of product development, manufacturing, sales and marketing, purchasing, and global strategy all report directly to him - bypassing the rest of the integration council. Seven other non-automotive issue groups report to the council.
Eaton will retire in three years, leaving Schrempp to run the company. He has hinted that he may step down sooner - 'as soon as I feel redundant.' But Eaton expects a Chrysler executive to eventually become head of DaimlerChrysler.
A 12-member interim supervisory board will serve until the final board is named. The permanent board will be organized under German co-determination law. The companies have a month to complete the legal process. The number of shareholder representatives will be reduced to 10 from 12, and 10 employee representatives will be added to create a 20-member board.
Daimler will make innovations like electronic stability, anti-skid, cockpit management and active cruise control technology available to Chrysler within a year. Engineers can make use of each entity's technical centers in Sindelfingen, Germany, and Auburn Hills, Michigan. Joint testing of future products at each entity's proving grounds is being considered.