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Three years ago it was a 'perfect fit of two leaders'

It all began with two of the automotive industry's most influential executives battling boredom during a dull speech at a Frankfurt motor show dinner in September 1997. They engaged in deep conversation and, informal as it was, the table talk turned out to be a seminar to reshape a sizeable part of the industry at the end of its first century.

Daimler-Benz chairman Jurgen Schrempp, sitting next to Chrysler Corporation president Bob Lutz, asked what had gone wrong two years earlier when the groups attempted an international marketing venture. “It was neither fish nor fowl and too complex,” said the American. “A joint venture that would have fallen far short of a merger.”

The German's response turned out to be the first move in a tortuous negotiation which led to the announcement in the spring of the following year, three years ago this month. “If we are agreed that the joint venture doesn't work then maybe we should do a merger.”

Mr Lutz was surprised at the turn of the conversation. “Whoa,” he said. “You're right, though, that's where the logic takes you. But you've got to talk to Bob, the other Bob – he's the Jurgen Schrempp of Chrysler.”

The other Bob was Eaton, chief executive, and the two could not find a suitable date in their diaries until January 1998, when they would both be at the Detroit motor show.

Bob Eaton did not take the merger talk seriously, forgot the reason by the day and thought it was a courtesy call. But Schrempp the strategist took with him a book packed with detailed charts and diagrams, prepared by his team during the intervening months.

It detailed intensifying competition in the industry. “Here is where the industry was 10 years ago,” he told the American. “Here is where we think it will be in 10 years' time. Here is why Mercedes-Benz needs a partner and here is why I think Chrysler needs a partner.”

The initial summary took three minutes, and Mr Schrempp apologised for being impolite but might have been surprised by the Chrysler executive's response – “we've started this as well, we've done our studies.”

They agreed to start talks and Mr Schrempp declined tea or small talk – he did not want small talk to dilute the impact of what he said.

First to hear the news of the conversation was his assistant, Lydia Deininger, over lunch (he left his wife Renate of 35 years for her in 1998). “I got the feeling there and then that the deal would happen,” Ms Deininger said later.

Ms Deininger played a key role in the negotiations and during the challenge of merging the two groups. She is said to have a strong personality and to have earned respect by not abusing her position.

Later that day Jurgen Schrempp met Alex Trotman (then Ford Motor Company) and his successor, Jacques Nasser. The three men agreed they should keep talking about their groups getting closer (the discussions with Ford were concluded only three weeks before DaimlerChrysler was born).

These two discussions, in the course of one day, show both the ambition of Mr Schrempp and his ability to seize initiatives. The Germans were always making the running.

Daimler-Benz head of strategy Eckhard Cordes was to lead the talks, playing Mr Nasty to his boss's Mr Nice (a well thought-out 'good-guy, bad guy' routine).

Author David Waller says in the book that the men have exceptional chemistry, mutual respect and share a sense of humour. Mr Cordes had both the confidence and intelligence to challenge the group chairman.

At the end of January, Chrysler indicated it wanted to continue with the talks and an exploratory meeting was arranged for early the following month in Geneva. The next was to be in New York shortly afterwards, with the two bosses delegating responsibility. Investment bankers and lawyers were added to the cast list and Project Gamma – a neutral name favoured by both sides – was rapidly gaining momentum.

Goldman Sachs and the Germans originally used Blitz as a working title which now looks revealing in the light of Daimler's assertiveness.

“It had incendiary connotations when trying to promote a friendly merger between a German and an American company,” observes author David Waller.

His subtitle for the book – The amazing inside story of the DaimlerChrysler merger – indicates a determination to stick to the letter of the wording of the announcement. Most people though saw it as a take-over from the start.

Cleveland (codename for Chrysler) and Denver (Daimler-Benz) began to address the fundamentals of the task ahead. Money came into it, of course, and also leadership – the two men at the top (in theory co-bosses) would need to get on well.

At the next meeting between Daimler-Benz and Chrysler, Dieter Zetsche entered the scene. Then, he was the German group's marketing chief – now he is the head of Chrysler and has already started a major cost-cutting exercise which includes thousands of redundancies.

Also taking part was Richard Parry-Jones, now in charge of small and medium car development for Ford Motor Company. He upset some of the German group by suggesting Mercedes could be the premium brand Ford wanted, apparently to fit below Jaguar, its luxury marque.

Mr Parry-Jones said: “We've done our analysis and while you're the best fit from our point of view, the best fit for you is Chrysler.”

He acknowleged that neither Ford nor Daimler would want to be seen as being acquired.

The comment was also significant because Ford, the No2 US carmaker, was saying it could not survive on its own.

The discussions moved on, with a round taking place at Geneva motor show in March. There, location of HQ (Detroit or Stuttgart) and who would get the top job were on the agenda. Jurgen Schrempp and Bob Eaton both offered to give the other the leadership for the good of the deal.

On May 6, the Wall Street Journal broke the story. The next day came the official announcement which was too good to be true – a merger of two automotive companies, “a perfect fit of two leaders” – and “no job cuts”.

  • Wheels on fire, Hodder & Stoughton, £18.99
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