Mixing The DNAs Of Mercedes And Chrysler

Dec. 21, 2004
What will the outcome be?

As if enough hasn't already been written about the historic proposed merger of Chrysler Corp. and Daimler-Benz AG, I hope to add a new perspective. In natural science, the DNA of an organism is what carries all of its genetic characteristics. These characteristics identify how it has grown, evolved, and become what it is. Both of these proud companies have distinctive DNAs, perhaps with the exception that Chrysler's has undergone some more severe transformations in the past few decades. The challenge of merging the two is much like the mating of species, in which the characteristics of both members of the species appear in varying degrees in the offspring. Unlike nature, the offspring will, from the outset, be larger than either of the parents, having been formed by the combination of the two. Without belaboring the scientific issues, the real question is, "Which of the characteristics will become dominant in the new DaimlerChrysler?" Mercedes is legendary for conservative engineering and rock solid, vault-like design and construction. Chrysler of late has become the quick-to-market, agile, and stylish auto producer -- albeit with some problems in quality. One could easily compare the two companies to a water buffalo (Mercedes) and a gazelle (Chrysler). Chrysler has been quick to market, but has had to correct flaws resulting from poor engineering or poor construction. Mercedes has been methodical to a fault in engineering, although this has slowed new model introductions noticeably -- especially against Japanese luxury competitors. Perhaps the most difficult blending of DNAs is in the design and engineering areas, where egos are large and the NIH (Not Invented Here) syndrome threatens the best of companies when it's believed ideas from outside groups aren't the "right" way of doing things. Yet, this is exactly where the relative strengths of the two companies can complement each others' weaknesses the most -- if they can link the positive characteristics instead of the negative ones. The great danger is that Mercedes will become so dominant that it will slow down Chrysler's innovative speed. Alternatively, if Chrysler plants in the U.S. begin building Mercedes products with poor quality, the vaunted Mercedes reputation could suffer. Certainly the management of the two companies understands this. Understanding the nature of the challenge is, however, sometimes insufficient. What must be done is to literally merge the organizations physically by the long- and short-term reassignment of the people who do the work, so that they share the same environment, live and work in the same culture, and have common, shared goals. The senior management team for Mercedes' M class SUV plant in Alabama did just that for a year before the plant opened. Few people are fully aware of the enormous differences they must have had to work through -- both among themselves and with their German parent in planning the American plant. Fortunately for Mercedes, it seems they did work out most of these issues and the plant is producing both effectively and with good quality. This intermixing of cultures takes time and incredible effort. More than that, it takes commitment at the top, middle, and eventually the bottom of the organizations. It is encouraging that the German labor union leaders are apparently willing to relinquish a single spot on the supervisory board to the UAW. The UAW and its German counterparts must be willing to adapt, evolve, and learn new behaviors. General Motors tried to learn from Toyota in the New United Motor Manufacturing Inc. (NUMMI) joint venture -- and they did, but it didn't spread to the rest of the company. The Prizm auto built in NUMMI's Fremont, Calif., plant is still almost a carbon copy of the Toyota it was derived from, and the quality far surpasses GM's standard production quality. Yet, even with an opportunity to learn from Toyota and this venture, GM still plods along with its old ways and mediocre cars. Even Saturn, GM's own, unique, "Japanese import fighter" plant has been threatened by the obsolete thinking of the UAW and GM's bureaucracy. Only the wisdom of a workforce who has had the chance to see, feel and be part of "a better way" prevented the overthrow of the unique contract and team agreement that is the heart of Saturn's success and the antithesis of the standard, adversarial UAW-GM contract. This will not be the last megamerger in the auto industry. It might turn out to be the best if the two companies can truly merge their DNAs so that their strengths are combined. The real question is whether the outcome will be an incredible fast, agile, yet powerful water buffalo; or a slow, clumsy, and not too alert gazelle. One will be a truly fearsome competitor in the 21st century. The other will be the prey of those who combine genetic strengths better.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!