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Rise of Borderless Corporation

DaimlerChrysler deal will test whether two cultures can merge in boardroom.

By Ron SchererStaff writer of The Christian Science Monitor / May 8, 1998



NEW YORK

Which will sit on the hood of the DaimlerChrysler: the elegant three-pronged Mercedes star or the chunkier five-pronged Chrysler version?

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The difference in emblems, though subtle, illustrates the challenge facing the latest megamerger between Germany's Daimler-Benz, producer of leather-seated road machines that can cost as much as $135,000, and Detroit's Chrysler Corp., which builds $40,000 Jeeps and $20,000 minivans.

Cross-border mergers have been taking place for years, as new information technology shrinks distances and the fall of trade barriers makes many borders mere lines on a map.

But no international business marriage to date has been this large - $36 billion - or this challenging. DamilerChrysler executives now face the task of combining a stodgy yet exacting German culture of technical elegance with a free-wheeling, all-American car company.

"This is a staggering development, a cross-border merger of immense dimensions," says Marvin Zonis, an international consultant based in Chicago.

Mercedes is known as a slow-moving and conservative company, while Chrysler has often been the leader in new ideas, such as developing the minivan. Mercedes, although based in Stuttgart, has a more global presence: Its automobiles are driven by Saudi princes, for example. Chrysler, however, has found ways to sell its cars to the enormous middle market - an area Mercedes has missed.

Even prior to the DaimlerChrysler announcement, the auto industry had been changing. Ford had purchased Jaguar. One effect of the merger: Budget Rent A Car offers the English sports cars. General Motors has an investment in Saab. Without this merger, says Mr. Zonis, "I don't think Chrysler would have survived."

The proposed marriage, announced yesterday in London, is also part of a larger trend. Companies believe that to compete globally they must either become giants offering a full range of services or niche players, making a product so unique that reputation alone will carry them forward. In recent weeks there have been some megamergers, such as Citicorp and Travellers, and Nationsbank and Bank of America.

The DaimlerChrysler merger is part of a massive wave of investment by German firms in the US. German investment has more than doubled here since 1994, and German firms employ more Americans than do companies from any other nation. Some of the big German companies include Bertelsmann, which owns many American publications and some of the big German chemical companies.

Good timing

The DaimlerChrysler merger comes at the right time for Chrysler, says Susan Jacobs of Jacobs & Associates in Rutherford, N.J. The US market is saturated, and the company's only avenue for growth is overseas. Chrysler, which has been building cars in Europe for years, has only 1 percent market share there. Ms. Jacobs says Chrysler's brands - Jeep, Dodge and Plymouth - can break into markets closed to Mercedes.

Economist C. Fred Bergsten sees the merger as a "win-win proposition." The director of the Institute for International Economics in Washington says the merger will add to the internationalization of industry and improve the efficiency of the two companies.

"There will be difficulties in meshing two big companies like this," he says. But he adds that Daimler-Benz has in the past two years moved toward an American-style management with an emphasis on shareholder value and efficiency. With the world surplus in auto production, he sees no antitrust problems arising from the merger.