–ефераты. Crisler Corporation. Senior thesis

Crisler Corporation. Senior thesis


1. History of Chrysler Corporation

2. History of Daimler-Benz Corporation

3. Short Summery of Current Position of DaimlerChrysler

4. Reasons for Merger and New Opportunities

5. Opportunities in New Markets

6. Decrease in Price of Materials Bought from Suppliers

7. Decrease in R&D Expenses per Production Unit

8. Confluence of Technologies of Both Corporations

9. Double Strength of the New Corporation

10. Market Concerns

11. New Corporation

12. Achievements of the New Corporation

13. Survey of Recent Stock Performance

14. Comments on some of Financial Ratios of the New Corporation

15. Government Concerned thatЕ

16. Environmental Issues in the New Corporation

17. Conclusion

History of Chrysler Corporation

It would be true to say that Chrysler Corporation was born long ago

before the year 1925 (when it was officially established). It was started

as a result of Walter P. ChryslerТs efforts to create a car that would be

affordable and competitive in the market. The first car would incorporate

four-wheel hydraulic brakes and a high-compression six-cylinder engine.

In 1924, New York for the first time saw a car that became the

ancestor of all generations of ChryslerТs cars. It was the Chrysler Six.

The car was not allowed to be presented at the New York Automobile Show,

because it was not in production. But to put it in production Walter

Chrysler needed to raise external funds. Eventually he came up with a very

inventive ideaЧto park his car in front of the building in which the show

took place. Going to the show, exhibitors and investors had a chance to

see the Chrysler Six. ChryslerТs efforts led to successЧa Chase Security

Banker underwrote a five million dollars issue of Maxwell Motor Corporation

(the company of which Walter Chrysler was a chairman) debenture bonds to

finance future development.

In a year Walter Chrysler purchased Maxwell Motor Corporation, renamed

it to Chrysler Corporation and became the only owner of it. The new company

was growing very fast. By the end of the year Chrysler Corporation had

3800 dealers in the United Stated alone. The profit that year was about

$17 million.

In 1934, the company introduced Airflow to the market. This car was

a result of engineer Carl BreerТs and Orville WrightТs work. They had been

working on a new generation of cars with a teardrop front. Unfortunately

this car did not match customersТ tastes. However the company recovered

thanks to innovations like ball bearings treated with Superfinish, a

forerunner of the automatic transmission (fluid Drive), and the color-coded

УSafety-SignalФ speedometer. The company continued this success in 941,

when it introduced the luxury-oriented Town & Country wagon. This was

the companyТs first minivan with nine-passenger seating and a rear hatch.

Besides that, it was the first minivan with genuine wood exterior panels.

This model was in big demand.

On August 18, 1940, the company was shaken by grief: Chrysler

CorporationТs founder, Walter P. Chrysler, passed away.

In 1955, Chrysler Corporation debuted its Уmaster pieceФЧChrysler C-

300. This car was the most powerful full-size car in the world, and soon

won twenty out of forty races conducted in 1955.

Chrysler Corporation played a big role in production for military

service during World War II. The companyТs full capacity was directed

toward production of tanks and 40mm trailer-mounted anti aircraft guns. In

total, Chrysler participated in sixty-six military projects that were worth

of more than 3.4 billion dollars between 1940 and 1945.

With the beginning of the era of space conquest, the Chrysler

Corporation actively participated in the construction of powerful engines

used to launch astronauts into orbit. NASA chose Chrysler to construct the

Saturn 1 and Saturn 1B launch vehicles, which were assembled at its plant

in Louisiana.

In May of 1998, an event took place that led to huge changes in the

auto world. Two of the worldТs most profitable car manufacturers, Daimler-

Benz and Chrysler Corporation, agreed to combine their businesses in an

equal merger.

History of Daimler-Benz

On October 1, 1883, Karl Benz started his own company, which was

called Benz & Cie, Rheinishe Gas Motor Enfabrik. BenzТs cars increased in

popularity after he started to build multiple cylinder engines with 16

horsepower, which increased the speed. The sale of automobiles was

increasing every year. In the single year of 1901, Benz & Cie sold 2,702

vehicles. By that time, Benz was selling his vehicles in France, England,

Russia, United States, and Singapore. Two years later at the age of 60,

Karl decided to retire from the car business and the company was taken over

by his sons, Eugen and Richand. On April 4, 1929, at the age of 84, Karl

Benz passed away at his house at Ladenburg. At the present time, Karl Benz

is considered to be a pioneer in car building in Germany and worldwide. In

Germany, Benz is a history figure and often there are signs at Mercedes

dealerships, which say, УFather Benz."

During World War II both companies, Benz & Cie and Daimler-Mototern-

Gesellschaft, were ordered to change their production lines for military

purposes. Both companies stopped making cars and began the production of

Benz & Cie aircraft engines. DMG was building the aircraft. 1916 was a

dramatic increase the number of employees in Benz and DMG factories. The

number of workers of the Benz factories increased from 7700 to 12,000 and

DMGТs workers increased from 3750 to 16,000. When the war was over, thins

became very difficult for the German car builders. Many car-building

companies had stopped production and had to close down their factories.

Both Benz and DMG were greatly affected by the war and by 1924, the

presidents of both companies signed a merger agreement, УAgreement of

Mutual Interest,Ф which made them into one company.

During this time, the Mercedes model became very famous and

recognizable around the world. Due to the increased popularity of the

model Mercedes, the new company was named Mercedes-Benz. The name Daimler-

Benz was used also. For the next decade, the Mercedes-Benz dominated the

German automobile market. Mercedes sales were much higher than the other

German car companies, such as BMW and Opel.

In the early 1930Тs history repeated itself with the rise of Adolph

Hitler. The management of Mercedes-Benz began gradually to lose control of

the company. The new government brought the vehicle under strict

regulation. The whole German car industry was taken over by the National

Socialists. Hitler announced that the production of German cars would be

Уdrastically reducedФ (Kimer, p. 276, 1986). In the mid 30Тs the Mercedes-

Benz factories were beginning to be used for military purposes. This idea

was given by Jakob Werlen, the former manager of MercedesЦBenz, who later

became HitlerТs personal advisor of transportation. An interesting fact is

that Hitler had many kinds of cars, but whenever he was photographed in a

vehicle, it was a Mercedes. One of HitlerТs favorite models was his parade

car, type 770, the УGrosser MercedesФ (Kimer, p. 282, 1986).

Wilhelm Kissel was a general director of the company in the mid and

late 30Тs. He tried to keep his company free from government involvement,

but this proved to be too difficult. By wartime, the Mercedes-Benz

factories were basically making military products. By the time Hitler

started the war with the U.S.S.R., Mercedes-Benz was making all kinds of

army equipment. The German army needed the best machines and Mercedes-Benz

factories were producing planes, trucks, tanks, and various kinds of

engines. The most famous Mercedes war product was a military plane called

Msserschmitt. This plane made the Luftwaffe the best airforce in the

world. The Msserschmitt was considered the best plane at that time; it had

a Mercedes DB 600 engine, which made this plane much faster than any other

planes in the world (Kimer, p. 283, 1986).

In 1945, after the end of the war, all of the Daimler-Benz factories,

much like the rest of Germany, were ruined. An American reporter wrote

about what he had observed in Germany right after the war - УCities were

dead, factories idle bridges down, rails gone. Rubble was everywhereФ

(Kimer, p. 283, 1986). World War II completely destroyed Daimler-Benz, at

one time the worldТs largest automobile company.

It took more than three years to rebuild the factories. However,

many divisions of the company were lost because they ended up in East

Germany. At first the company was rebuilding U.S. army vehicles. By 1949,

over 6,000 cars had been built and the main focus of Mercedes-Benz was

again the production of luxury cars (Kimer, p. 290, 1986).

Within the next two years, the company was completely rebuilt and the

number of employees since the beginning of the war was doubled. Now the

number of workers was almost 40,000. By the year 1952, Mercedes-Benz had

built 100,000 cars and 250 in the United States. In 1955, the new models

220, 300, and 300S were introduced in a Frankfort Auto Show and the model

300S was named the car of the year. From that time, Mercedes started to

export more cars around the world. However, most of the cars were sold in

Germany (Consumer Guide, p. 32, 1986).

By 1960, the Mercedes was the number one selling car in Germany, but

at the same time, the BMW became a very close competitor. Mercedes lost a

large share of the market to BMW. This was a time when the company started

to look for new markets. The United States was a promising market for the

Mercedes. In the early 60Тs the company increased its sales to 50,000 cars

sold in the U.S. (Consumer Guide, p. 46, 1986)

However, in the mid 60Тs, the sales went down. The new 190D four-

cylinder diesel model did not sell well in the U.S. and Europe. It took

the company three years until it became one of the leaders of the market.

In 1970, Mercedes introduced three new models, which they called the УNew

Generation.Ф The new models were 280S, 280SE, and 280SL. By that time,

the Mercedes became the number one imported car in England, France,

Belgium, Holland, Switzerland, and Austria (Consumer Guide, p. 48, 1986).

Another reason why the Mercedes became one of the most popular cars in

the world was its participation in auto racing. In the late 60Тs, Mercedes

cars participated in nine races and won seven of them. After tremendous

racing results, people around the world wanted to purchase the C-111 model

which would set up three new world records; however, Mercedes would not

make this available to the public for sale. The company was receiving a

thousand letters a day with offers buy the C-111 model and in 1976 the

similar model C111-11 was introduced at the Geneva Automobile Show. The

new model had tremendous power. It had 350 horsepower, and it could get

from zero to sixty mph in six seconds. Its top speed was 190 mph. Also,

the C111-11 Diesel set a new record in durability by running at a speed of

156 mph for 10,000 miles straight (Consumer Guide, p.55, 1986).

In 1982, the 190 series was one of the best selling models in the

world. The 190 model was a small sized car which opened for Mercedes an

entirely new market. In Germany, this model became a best selling car in

1985. This was a very important establishment for Daimler-Benz because the

190 model became the number one selling small car in Germany, leaving the

long-time leader, BMW, in second place (Consumer Guide, p. 64, 1986).

In the early 1990Тs, the Mercedes market share in the United States

was greatly decreased. The reason for this was that the Japanese car

companies started to produce luxury cars. For example, Toyota was

manufacturing Lexus, Honda was manufacturing Acura, and Nissan was

manufacturing Infiniti. These cars today are becoming increasingly

popular among Americans. However, German management found a way to

overcome the competition by building a Mercedes factory in Alabama in

1994. Now, a large share of Mercedes cars sold in the U.S. are produced by

American labor. Producing Mercedes in the U.S. has solved many problems

for the company. Many people in the U.S. have an opinion about buying

American-made cars with the purpose of supporting the American economy.

The second problem was that tax on imports was greatly reduced. The cost

of a German laborer was 50% higher than an American laborer in Alabama. By

building cars in the United States, all these problems were solved

(Fortune, p. 150, 1997).

Similarly, Mercedes used the same strategy in South America. It built

a new plant in Brazil. This plant decreased the prices of the cars and

made the purchase of a Mercedes more affordable for the South American

region (Motor Trend, p. 123, 1997).

In the past five years the demand for 4x4 vehicles has been

increasing. Two years ago, Mercedes came up with a new M-class jeep model.

The price of the is jeep is around $34,000, which is competitive with the

American-made Chevy Blazer, Ford Explorer, and Grand Jeep Cherokee. By

making a jeep, Mercedes is keeping up with its competitors for this share

of the market. The new jeep is a success because it was named the 4x4

truck of the year for 1998.

Short summary of current position of DaimlerChrysler

Company ownership: European, U.S. and other international investors own

DaimlerChrysler; there are approximately one billion shares outstanding.

65% is made up of European investors.

Global Stock: DCX ordinary shares are traded on the New York and Frankfurt

stock exchanges as well as nineteen other major stock exchanges worldwide.

Group Headquarters: Stuttgart, Deutschland, and Auburn Hills, Michigan,


Chairmen: Robert J. Eaton and Jurgen E. Schrempp

Management Board: Consists of fourteen members, including the two chairmen

and the heads of the operation and functional divisions.

Supervisory Board: Consists of ten shareholdersТ representatives and ten

employeesТ representatives. The Supervisory Board appoints the Board of

Management and approves major company decisions.

Market Capitalization: Currently about EUR 80 billion (March 1999)

Investments: 1999-2001: EUR 46 billion to be invested in the future of


Automotive Sales: 4.5 million units in 1998 (Passenger Cars and Commercial


Employees: 466,900 at the end of 1999

Manufacturing Facilities: in 34 countries.

Global Brands: Mercedes-Benz, Chrysler, Plymouth, Jeep, Dodge, Smart,

Freightliner, Sterling, Setra, Airbus, Eurocopter, Ariane, Debis and


Product sold: More than 200 countries

Official Language: English

Financial Reporting: US-GAAP accounting with earnings reported quarterly.

Reasons for merging and new opportunities.

In 1998, at the Detroit Auto Show, the idea of cooperation of Daimler-

Benz and Chrysler Corporation was born. Schrempp, Chairman of Daimler-Benz

and Eaton, chairman of Chrysler Corporation, began negotiations about

possible combination of two large automobile manufacturers. УWe are

leading a new trend we believe will change the future, the face of the

industry,Ф Eaton said five months later when the deal was announced.

The two chairmen acknowledged that the merger would not be easy.

Their own study of transnational mergers suggested that 70 percent failed

to achieve the kind of success that had been anticipated.

As a result of the long series of negotiations, a new company named

Daimler-Chrysler was established. The company would manufacture not only

cars, but commercial trucks, trains and rockets as well.

The goal of the merger was to create a company that would be able to

stand better against other world leading car producers like General Motors,

Ford, Nissan, Volkswagen, Toyota and so forth.

With the creation of a new company, both of the old components were

going to benefit from the following:

. Decreased R&D expenses per production unit

. Confluence of technologies of both firms

. Double strength in total

. Opportunities in new markets

. Decrease in price of materials bought from suppliers

Opportunities in new markets

Both Chrysler Corporation and Daimler-Benz operate in quite saturated

markets (in terms of their current products). In order for them to grow,

they will have to carry on those overseas markets, which means development

of products in accordance with preferences of the new markets.

Developing new products for a different market segment or establishing

an additional brand might have implications for the positioning of the

existing product range. Penetration into completely new market segments

for both companies would involve both high costs (new offices, stores, and

advertisement programs) and substantial risks for the companies.

Another method for successful penetration and establishment in new

markets is co-operation with another manufacturer who already has a

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