Thursday, Apr. 30, 2009

Daimler-Benz Merger

In 1998, German automaker Daimler-Benz purchased Chrysler for $36 billion in what was then regarded as one of the largest industrial mergers ever. But the potential global powerhouse turned out to be a colossal disappointment. Cultural differences immediately caused a rift between the two companies. Daimler, famous for luxury brands and affluent customers, didn't understand the price-conscious concerns of the U.S. automaker. And worried that sharing Mercedes components would undermine its brand, the German company broke its parts-sharing agreement with Chrysler, which was just beginning to suffer from the current U.S. auto crisis. With shareholders calling Chrysler an "affliction," Daimler essentially paid Cerberus Capital Management $650 million in 2007 to take Chrysler off its hands.

Read "Chrysler and General Motors Make New Bids to Survive."