GERMAN luxury car maker Daimler-Benz and the Chrysler Corporation of the US yesterday confirmed the biggest industrial merger in history to create the world's fifth-largest car
producer.
The deal, clinched at a summit meeting of executives from the two companies in London's Dorchester Hotel yesterday, dwarfs the battle for control of Rolls-Royce Motors by Daimler's German rivals BMW and VW and puts pressure on them - and other potential world market players - to review their positions in a rapidly changing sector.
More takeovers, link-ups and even plant closures appear inevitable as world-wide rationalisation continues in attempts to improve market share and reduce overcapacity.
Welcoming the link, Daimler chairman Juergen Schrempp said: ''The two companies fit together tremendously well as leading firms in their respective markets.''
It was, he said: ''A marriage made in heaven.''
The deal, which pairs
Germany's largest industrial group with Detroit's third-largest motor manufacturer, creates a global conglomerate with holdings in cars and light trucks, heavy trucks, aerospace, trains, automation technology and electronics.
At a London news conference, Schrempp and Chrysler chairman Robert Eaton hailed the tie-up as an historic deal which would position the group as a leading player in the global car market.
The new group will produce more than four million cars and trucks annually, trailing only
General Motors, Ford, Toyota and Volkswagen in unit output and the transatlantic alliance will offer a full range from rugged off-road vehicles to luxury limousines.
Daimler makes Mercedes-Benz luxury cars and the US-built M-Class sport utility vehicle, while Chrysler sells vehicles under the Chrysler, Dodge, Plymouth and Jeep brand names, mostly in North America.
Daimler described the deal as a merger of equals although the terms of the deal revealed that Daimler is clearly the senior partner.
Under the pact, Chrysler shareholders will receive 0.547 DaimlerChrysler shares per Chrysler share, giving them 43% of the new company's share capital.
Daimler shares will be traded into the new company at a one-to-one ratio.
The new merged operation is to be co-led by Schrempp and Eaton, each running joint headquarters for the company in Stuttgart and Auburn Hills, Michigan, although Eaton is to leave the new company's board in three years.
Confirmation of the merger sent shares in both companies surging.
Analysts have welcomed the merger plans, saying the two firms are a good fit, with Daimler looking for an opportunity to expand in the US and beyond its luxury car base.
Chrysler, meanwhile, stands to benefit from Daimler's engineering prowess and access to the European market where it holds only a tiny market share. But the deal's real value may be that the two companies will now be able to reduce administration costs, share research and development expenses and secure better component prices.
Driving the merger plans are Chrysler's desire to build up its presence in Europe, where it had extensive manufacturing operations until 20 years ago and where it is overshadowed by its American as well European and Japanese rivals, and Daimler-Benz's ambitions to expand on the other side of the Atlantic.
Until it pulled out of Europe in 1978 Chrysler was a major player in the UK with car manufacturing plants at Linwood in Renfrewshire and the English Midlands which were subsequently sold to Peugeot of France.
Linwood, once home of the famous Hillman Imp, closed in the early eighties.
Since 1979, when it was on the brink of going under, Chrysler has turned itself into the lowest-cost car producer in the US, specialising in sports utility vehicles and budget-priced cars.
Through its Mercedes subsidiary, Daimler-Benz has a major foothold in the opposite end of the car market, in high-priced luxury models.
The new group, which will maintain the current brands and their distinct identities, will have combined market value of about #48bn, sales of more than #80bn and 421,000 employees world-wide.
Last year the two companies made a combined profit of more than #4000m.
The merger of two of the industry's top names will also increase pressure on other carmakers to follow suit in the light of the tremendous overcapacity in the sector.
It will also shift market attention back to BMW, which has tried to enter the volume car market through its 1994 takeover of Rover Group, but has yet to see any return on that investment, and is in the process of acquiring Rolls-Royce.
Comment Page 25
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article