The decision to let go of Chrysler sure was not an easy one. In fairness to Daimler it has tried to help its American automaker partner by providing additional investment but despite the efforts still Chrysler was not able to regain financial health. This exactly what forced Daimler to finally consider selling its money-losing arm.
It can be remembered that when Dieter Zetsche returned to Germany in the fall of 2005 to assume the position as the next CEO of DaimlerChrysler AG, he has vowed to develop an effective working partnership between Mercedes-Benz brand of quality Mercedes 190E parts and the Chrysler Group. Zetsche said, "Early on in my new assignment, I pushed the organization to leverage the merger to the maximum extent." Unfortunately the effort resulted to an unfavorable effect. Instead of developing new ways for the German and US auto divisions to work together, it somewhat defined the limits of their potential cooperation.
CEO Dieter Zetsche is said to be the German executive who have rescued Chrysler from bankruptcy in 2001 and 2002 but under the pressure of angry investors even the savior is left with no other choice but to create the contract to sell the automaker from Auburn Hills.
The chosen new owner of Chrysler is the private equity firm Cerberus Capital Management. The sale of Chrysler to Cerberus was unanimously approved by DaimlerChrysler’s supervisory board.
According to Zetsche, "Even though I went through an emotional roller coaster in the past year, I'm glad of the outcome of the process. I'm very confident we've found a strong, sound and sustainable base for a new Chrysler."
The endorsement that came from Ron Gettelfinger, the President of the United Auto Workers came as a surprise since in most of his interviews he has stressed over and over again that he prefers Chrysler to remain with Daimler rather than ending up controlled by a private firm. The endorsement from UAW President has helped sway the other labor representatives on the supervisory board to approve the sale to Cerberus.
Employee representatives hold 10 to 20 seats and according to Zetsche that they seemed to be satisfied that the deal with Cerberus has taken into account the well-being of Chrysler’s 80,000 employees. Zetsche also added, "That was my agenda as well. It was very much a consensus-based meeting. There was no controversy or tension."
The deal is expected to conclude in the third quarter and finally ending the nine-year merger of Daimler-Benz and Chrysler Corp. Some German papers like the tabloid Bild have rejoiced over the sale of Chrysler and declared, “Finally, we got rid of Chrysler!”
However inside DaimlerChrysler the mood was different and even strange according to employees. The sale of Chrysler will definitely bring changes to Daimler and the first thing will be the changing of name from DaimlerChrysler to being Daimler-Benz again. Daimler is hoping to reposition itself as a premium carmaker with a market-leading heavy-truck business. The separation of Chrysler has shrunk the company’s size in time when all its other rivals are combining forces.
Now that Daimler and Chrysler are finally separating ways, Zetsche was asked why the merger didn’t workout to which he answered Daimler had overestimated the potential synergies between Chrysler and Mercedes.
There was also a problem in terms of sharing components caused by the big price gaps between Mercedes and Chrysler vehicles. Zetsche further added that DaimlerChrysler has also miscalculated the impact that the transfer of Mercedes technology would have on Chrysler’s brand especially when it comes to the pricing of its vehicles.
Chrysler’s position in the company further weakened last year when it incurred a total of $1.5 billion loss in the third quarter brought about by the high gas prices cut demand for its vehicles. Zetsche has also made it clear that the decision to sell Chrysler occurred gradually. "There wasn't one triggering event."
Last February 14, Zetsche shocked the world when he announced that all options were under consideration for Chrysler. And when asked when the company decided to sell Chrysler, he said, "There was no one day, but a gradual development, with a growing likelihood in one direction."
The time that Zetsche has lined up the whole supervisory board to support him in forming the merger shows his remarkable ability as a consensus-builder unfortunately the rest of the sale were handled clumsily.
Gerald Meyers, a business professor at the University of Michigan and former Chairman of the AMC automaker acquired in 1987 by Chrysler said, "He knowingly -- I think unknowingly -- put the company in play, turned it over to investment bankers and in the process demeaned the company and demoralized the work force."
At present the deal between Cerberus and Daimler is not yet finished, Zetsche said that he would remain in charge until the deal is finally concluded. He said, "Until the day of the closing, this is a company of DaimlerChrysler. Tom LaSorda and the management will report to me."
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