Sunday, April 18, 2010

The Daimler Chrylser Merger: A Lost War of Assimilation (Part 3)

The Daimler Chrysler Merger: A Lost War of Assimilation (Part 3)

Direct meddling by Schrempp from Daimler led to large losses at Chrysler. At first only two more executives came from Daimler to take the rei(g)ns: Dieter Zetsche and Wolfgang Bernhart. The first to be fired was the head of Sales and Marketing. He was replaced by a Mexican Chrysler executive and the CEO spot was given to a Canadian. This indicates a strong tendency to diminish the American contribution and illustrates a negative mindset. Within 2 months, Zetsche had designed a three year turn around plan that called for cutting 26,000 jobs and eliminating 6 plants violating many of Gebler’s Ten Merger Commandments including : Take time to find out what makes them tick, take it one function at a time, get acquainted and find out what drives talent. Meantime, Bernhart alienated suppliers (Gebler’s Commandment: Integrate don’t alienate).

Bringing German staff to America with the mandate of “Fixing the place” was simply the wrong tactic born of cultural ignorance and arrogance. To initiate a reorganization before completing the integration was poor business practice. To then purchase a third of Mitubichi at the same time was arrogance to the point of fool hardiness. In a time of such instability, initiating a restructuring with German executives in American positions was doomed to failure. The cultural differences were magnified in such issues as sexual harassment, smoking and drinking in the workplace and hierarchical and dominance levels. All the differences were magnified in an adversarial environment. Authoritarian tendencies alienated workers at all levels. Insecurity from dramatic and sweeping changes reduced performance and quality.

In my opinion, the Daimler executives were largely responsible for the decline of the value of the company. They embraced the entire deal with the wrong spirit. The right spirit would have been one of collaboration not exploitation. They were not able to hide their agenda for long and when it was fully exposed from the mouth of the liar himself, the Americans reacted like disillusioned brides might- some went home to momma, others pouted and refused to participate and the best of them stood their ground and reasoned until they were ‘divorced’. While one would think that individuals like Eaton who had led the company into the fiasco would have had more fight for the company in him, he did not have the stomach for it.

A CEO with her head on straight would be able to put the good of the entire enterprise above previous loyalties and national insecurities. I cannot understand why errors of the magnitude demonstrated in this case do not have more severe consequences for the people involved. Perhaps it is just the wisdom of hindsight but keeping people in their positions until the integration was completed seems far more logical. Human resources should have been in on the merger from the very early stages dealing with potential issues and smoothing the people part of the merger. The American talent in particular should have been assured of a position for a period of time such as a year or two. They understood their own systems and labour resources. Clear communication of a plan and of the process for moving forward should have been developed. If Daimler had intended for Chrysler to run independently for a period of time that should have been communicated and their progress should have been monitored. Exchanges of personnel should have been arranged to integrate the two cultures. While they did try to educate the opposite team about such issues as sexual harassment and German dining etiquette, they missed the more vital issues of two cultures working in cooperation.

Most mergers fail. The largest contributor to this failure comes from cultures that clash but it can be done successfully. Keeping stability should be a first priority and that is achieved by keeping the lines of authority in tact until such time as the foundational integration is accomplished. According to Gebler’s research there are rules to follow to beat the odds: 1. Don't act like a conqueror. 2. Find out what makes the new team tick. 3. Take it one function at a time. 4. Integrate, don't alienate. 5. Get acquainted. 6. Understand what drives talent. 7. Don't assume you will be heard. 8. Bridge the gap. 9. Lend an ear. 10. Anticipate some clash. Daimler’s more dominant executive not only violated these rules but they destabilized Chrysler with lies and poor human resource practices. In the process they guaranteed the failure of the enterprise.

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