The Daimler/Chrysler Merger: The Involvement of the Boards

On May 7, 1998, at a press conference in London that had been called on very short notice, the CEOs of Daimler‐Benz AG and Chrysler Corporation, Jürgen Schrempp and Robert Eaton, announced that their two companies had decided ‘to get together in a merger of equals.’ The combined company would have $132 billion in annual revenues; it would be the fifth largest automaker in the world, employing 428,000 people – about one‐half in Germany, one‐third in North America, and the rest spread across 200 countries around the world. Although it was the largest industrial merger the world had seen to that date, the announcement took most observers by surprise. Negotiations had been conducted under strict secrecy, with only a very limited number of persons from each company involved. At the London press conference, both CEOs explained the rationale for the merger. In their opinion, both companies were too small on a global scale to prosper in the long‐term. This handicap, they felt, could be overcome by joining forces; their product ranges and geographical reach made the two enterprises near perfect partners (refer to Figures 1 and 2). At the press conference, the CEOs also publicly announced as one of their guiding principles that this move would be ‘a merger of growth; there will be no layoffs.’ They also stressed their determination to increase shareholder value, to obtain $1.4 billion in savings during the first year of the merger, and to complete the integration process within three years. After the dust of this ‘big bang’ had settled, some of the details of the merger’s secretive preparation became known. The marriage had indeed had a most interesting courtship.