Daimler-Benz: European giant. Off Mercedes-Benz base to aerospace, high-tech ventures
Stuttgart, West Germany
One hundred two years ago, Stuttgart engineer Gottlieb Daimler tried out a ``four-wheeled automobile, suitable for country roads, and driven by a petrol engine.'' Mannheim inventor Karl Benz tested a three-wheeled ``gas-engined vehicle'' at the same time. The companies that Daimler and Benz founded joined forces in 1926. They never went in for mass production, however. Their business was to be precisely engineered cars and trucks. Their motto: ``The best or nothing.''Skip to next paragraph
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But the Stuttgart-based maker of the Mercedes-Benz is no longer the simple automotive engineering company it was when it began. In the past three years, Daimler-Benz has blasted away from the terrestrial confines of automobiles and trucks and into the daring world of aerospace, high-tech, and corporate conglomeration.
Enriched by its car and truck sales and backed by West Germany's top bank, Daimler has rapidly bought up major blocs of German heavy industry. At $37 billion in sales last year, it is by far the biggest industrial company in West Germany and is emerging as Europe's premier aerospace, electronics, high-tech, automotive group.
Daimler is on the verge of taking a big stake in Messerschmitt-B"olkow-Blohm (MBB), the Hamburg-based aircraftmaker. It already owns Dornier, MBB's chief rival, and controls Allgemeine Elektrict"ats-Gesellschaft (AEG), a sprawling electronics concern, and Motoren & Turbinen Union (MTU), a big engine manufacturer.
All this positions Daimler strongly in European aerospace and electronics. MBB has just over one-third of Airbus Industrie; it's an unprofitable stake, but the West German government has promised to shield Daimler against Airbus-related losses. Daimler also has a small but significant interest in Matra, the French defense and electronics giant. And through AEG and Dornier, Daimler is participating in Europe's Hermes spaceplane project, the Ariane rocket, and the Columbus space station program.
Chairman Edzard Reuter has frequently acknowledged interest in making an acquisition in the United States, especially in aerospace. (Daimler already owns US-based Freightliner, the No. 2 maker of 15-ton trucks after Navistar. Worldwide, Daimler is the biggest producer of trucks over six tons.)
``As long as the cash flow continues,'' Mr. Reuter told shareholders in mid-May, ``we should not let ourselves be held up.''
His aim is a world-size West German corporation capable of competing against the corporate behemoths of Japan and North America. With major parts of this nation's industry now under the Mercedes star, it is no exaggeration to say that what's good for Daimler-Benz is increasingly good for West Germany.
The company is being backed in its acquisition spree by Deutsche Bank, West Germany's No. 1 bank and Daimler's biggest shareholder. Such an alliance is normal for Germany, but its US equivalent would be Citicorp controlling General Motors, which in turn would control General Electric, McDonnell Douglas, and Lockheed.
Company officials use the vague word ``synergy'' to describe what their acquisitions are all about. Somehow, they say, the electronics of AEG, the factory-automation systems of Dornier, combined with the know-how of Daimler-Benz, will add up to new opportunities, new products, and a more profitable company overall. To compete globally, says a Daimler report explaining its recent expansion, ``energies must be harnessed, resources rationalized, and knowledge pooled.''
This is a common enough strategy in the automotive industry. General Motors made a similar move with its acquisitions of Hughes and Electronic Data Systems; Volvo and Saab have aerospace lines; British Aerospace is taking over Rover Group.
But the industrial landscape is also littered with ill-considered conglomerates - ITT is an example - that have failed to make synergy work. And gigantism is a bold break with West Germany's tradition of industrial specialization, acknowledges a Daimler strategic planner, Rolf Scharw"achter. So exactly how all the pieces will fit together is undetermined.
``There is a limit to synergy,'' Dr. Scharw"achter notes.
None of Daimler's newly acquired companies are particularly strong at the moment. But Scharw"achter says the aim is to make each one competitive, producing products for Daimler's automotive needs and for the wider marketplace. This will enable Daimler to hedge against the possibility of slower car and truck orders, to build the electronically advanced ``automobile of the future,'' and to develop new products such as factory-automation systems, robots, and software.