Page 668 - Introduction to Business

A-2 APPENDIX

BRIEF HISTORY The origins of Chrysler Corporation can be traced to
DaimlerChrysler AG—the fifth-largest automaker in the 1920, when Walter Percy Chrysler resigned (because of
world, with a global market share of 9 percent—is the policy differences) from his position as president of
product of the November 1998 merger of Daimler-Benz Buick division of General Motors and went on to restore
AG of Germany and Chrysler Corporation of the United Maxwell Motor Corporation to solvency. Because of his
States. A truly global company with manufacturing facil- huge success in turning around Maxwell Motors, the
ities in 34 countries and sales on all continents, company was renamed Chrysler Corporation. To
DaimlerChrysler has a global strategy, a global work- achieve economies of scale in production, Walter
force, a global shareholder base, globally known brands, Chrysler acquired Dodge Brothers Corporation in
and leading-edge technology. Yet, 47 percent of its total 1928—a car manufacturer in Detroit. Furthermore, to
revenues come from the United States, 6 percent from meet the needs of the lower-end consumer market,
Canada and Mexico combined, 17.5 percent each from Chrysler developed the Plymouth and DeSoto divisions
Germany and other European Union countries, and the within Chrysler. During World War II, Chrysler diverted
balance of 12 percent from the rest of the world. its attention from cars to the manufacture of B-29
DaimlerChrysler sold 4.3 million passenger cars and bomber engines and anti-aircraft guns and tanks.
commercial vehicles in 2003. The Mercedes Car Group Success in this area later led Chrysler to become the
dominates vehicle sales with some 40 percent of total prime contractor for NASA’s Saturn booster rocket.
sales followed by the Chrysler Group with 38 percent Unfortunately, Chrysler Corporation was unable to
and Commercial Vehicles with 22 percent. Vehicle adjust to the aftereffects of the 1973 oil shock, which cre-
financing is a growing and important support compo- ated a huge demand for well-built, fuel-efficient cars. In
nent of vehicle sales. 1979, the U.S. government decided to rescue Chrysler
The origins of Daimler-Benz go back to the mid- through a loan guarantee in exchange for the company’s
1880s when, unknown to each other, Karl Benz and promises of management change and restructuring
Gottlieb Daimler (who lived some 60 miles apart around of operations. As president, Lee Iacocca successfully
Stuttgart, Germany ) both developed small and fast-run- steered Chrysler Corporation through these turbulent
ning internal combustion engines that were used to times and implemented a process of cost control, disin-
power Benz’s first car in 1885 and Daimler’s in 1886. In vestment, and new product introduction.
1900, Daimler’s need for financial resources to manu- In their quest to grow and maintain their global pres-
facture high-performance cars led to his meeting with ence—in light of stiff competition from Japan and South
Austro-Hungarian businessman Emil Jellinek, who Korea and excess automotive production capacity
offered to provide financing if Daimler named the worldwide—Daimler-Benz and Chrysler came to one
vehicle after Jellinek’s beloved daughter—Mercedes. A conclusion. They realized that a Daimler-Benz-Chrysler
series of subsequent events led to a merger between merger would complement (in terms of product lines
Daimler and Benz in 1926. They formed Daimler-Benz and geographical coverage) each other and also bring
Aktiengesellschaft to manufacture cars under the brand about synergies that could result in billions of dollars in
name Mercedes-Benz. Daimler-Benz’s focus was on cost savings while at the same time extending their
leading-edge technology and long-term global market global reach. After months of negotiations, Daimler-
share often at the expense of short-term profits. Benz and Chrysler agreed to merge and form
Mercedes-Benz’s strategy was to sell its vehicles as an DaimlerChrysler AG in May 1998. This merger of equals
“investment” in quality, reliability, and luxury. In the (hence two corporate headquarters) resulted in the
mid-1980s, Daimler-Benz embarked on a diversification formation of three automotive divisions: Mercedes-
strategy that involved three acquisitions: Motoren und Benz passenger cars; the Chrysler Group; and Commer-
Turbinen-Union (MTU)—a manufacturer of aircraft cial Vehicles. Furthermore, in 1999 DaimlerChrysler
engines and diesel motors for tanks and ships (in 1985); Aerospace merged with France’s Aerospatiale Matra and
Dornier—a manufacturer of spacecraft systems, com- Spain’s CASA to become a part (30 percent ownership) of
muter planes, and medical equipment (in 1985); and European Aeronautic Defense and Space Company
AEG—a manufacturer of turbines, robotics, household (EADS)—the largest aerospace firm in Europe and the
appliances, and data processing (in 1986). In the mid- second largest in the world. In order to boost its pres-
1990s, ABB (Asea Brown Boveri), a Swedish-Swiss engi- ence in Asia where DaimlerChrysler has less than five
neering and construction company of international percent market share of the automotive market, the
repute, teamed up with Daimler-Benz to form ABB company formed an alliance with Mitsubishi Motors
Daimler-Benz Transportation, which became the Corporation of Japan in early 2000 by acquiring a 34
world’s largest rail system provider. percent stake in that company. In addition, Daimler-

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