DaimlerChrysler will find more synergies - but it won't use platform sharing to cut costs.
'If all the company's divisions start looking the same, we've got a problem,' said D/C board member Tom Gale.
The company will pursue benefits from the merger of Chrysler Corp. and Daimler-Benz AG in more modest ways than platform sharing. For example, it will combine its treasury staffs and base the department in the USA in Auburn Hills, Michigan, beginning April 1.
Platform sharing is a growing practice in the industry. For example, Volkswagen AG is sharing platforms across its range of brands to cut development costs.
'There are plenty of opportunities for sharing,' said Gale. 'But it doesn't mean things have to be off the same platform.'
Meanwhile, financial institutions, unimpressed by the company's performance to date, are expecting much more from DaimlerChrysler.
'It is not over in terms of achieving synergies,' said Scott Merlis, auto analyst for Wasserstein Perella Co. in New York. 'Integration sometimes continues for decades. There will always be better synergies to be found.'
Merlis expects D/C to identify enough shared operations next year to save the company an estimated $2 billion, or 1.3 percent of its 1998 revenue.
'There's probably more to be done in certain engineering areas and certain research and development areas,' Merlis said.
Jurgen Hubbert, DaimlerChrysler board member in charge of Mercedes-Benz and Smart cars, agreed that the new company must continue to identify shared activities that can save money.
Now that D/C has trimmed its management board from 17 to 14 and disbanded its post-merger integration team, it is up to the company's individual business units to identify cost-saving synergies, Hubbert said, during a media event October 1 in Nice, France, for the 2000 Mercedes-Benz CL coupe.
'Now the real work starts,' Hubbert said. 'What's different is integration will now be performed by our business units. We are done with integrating the management board. We are, of course, still just as interested in all the other things integration will bring: buying parts in common, sharing logistical functions, saving costs.'
DaimlerChrysler announced September 24 that it has trimmed its management board and created three automotive divisions - Mercedes-Benz/Smart, headed by Hubbert; Chrysler/ Plymouth/Jeep/Dodge, headed by James Holden; and Commercial Vehicles, headed by Dieter Zetsche.
While the company will continue in its search for money-saving combinations, it has chosen to do so without the guidance of Tom Stallkamp, who has led the company's integration efforts during the past 16 months.
Stallkamp will retire December 31. He was one of the casualties in the management reorganization.
In product development, it will be up to D/C's Automotive Council to find synergies, Gale said, during a media tour of the new Walter P. Chrysler Museum in Auburn Hills on September 30.
Gale is coordinator of the Automotive Council, a small group of DaimlerChrysler board members charged with crafting future strategies and plans for vehicles and components.
D/C said it will save $1.4 billion this year through shared operations, with about one-third of the expected savings coming from combined purchasing.
But putting a Mercedes-Benz engine in a Chrysler vehicle or jointly designing a new plant to build cars in Europe will take more time to accomplish, said John Casesa, auto analyst at Merrill Lynch in New York.
'I think it will be an ongoing process that will take quite a few years,' he said. 'Although during the next couple of years they will be getting through the meat of it.'
Casesa said that he is confident that D/C has achieved most, if not all, of the $1.4 billion in savings that the company had promised for 1999. During 2000, Casesa expects D/C to look more closely at product development for operations that can be shared.
Steven Rossi, DaimlerChrysler vice president for global product communications, said the company has not announced a savings target from shared operations for 2000.
Automotive News reporter Jim Henry contributed to this report.