The Book of the Week is “Taken For A Ride, How Daimler-Benz Drove Off With Chrysler” by Bill Vlasic and Bradley A. Stertz, published in 2000.
This was a story not atypical in many ways, of any 1990’s merger between two big-name public companies. One difference, however, was that one was American (Chrysler), and the other, German (Daimler-Benz). Thus, there was the additional difficulty of minimizing employee friction in connection not only with the different corporate cultures, but with the different national cultures.
Another difference was that Daimler and Chrysler weren’t direct competitors– product-wise demographically or geographically, so there was little personnel duplication between them. So minimal employee layoffs were in order.
Initially, Kirk Kerkorian was a major shareholder of Chrysler. In April 1995, his group Tracinda made a tender offer for all of Chrysler, but unwisely publicly admitted it had yet to line up the financing for purchasing the company. The news brought out all the greedy stakeholders: Tracinda’s people, and institutional and individual shareholders of Chrysler. Other parties to the possible transaction included investment bankers, and consultants of various kinds– image, financial, M&A, and legal.
The media stoked public anger at Tracinda for its poor planning (which might have been deliberate, to rattle the target). The Wall Street Journal made the emotionally charged claim that Kerkorian would saddle Chrysler with a heavy debt load if his bid was successful. Of course, regardless of success, he knew he would boost Chrysler’s share price and make more money for himself.
There were various times when different male corporate leaders became angry at others, usually when they felt they had or were going to get, less power or money than they thought they deserved.
For example, anger was directed at Lee Iacocca, former turnaround artist of Chrysler around 1980. At the time of the Kerkorian affair, he was a paid corporate consultant to Chrysler but contracted with Kerkorian, too. So Chrysler revoked the stock options he still had. “He [Iacocca] was… madder than a hornet when he heard he would get only $42 million…”
By the mid-1990’s, auto industry executives knew their companies would be swallowed up by bigger ones if their own companies didn’t make acquisitions or team up with their competitors.
One other possible way to expand was to try to sell cars to Third World countries like Vietnam. However, the bulk of those Asians– who were still farming and fishing– would need to save their entire annual salaries for forty years (!) if they wanted to buy even the lowest-price Chrysler car, the Neon. Besides, their country still had few paved roads, anyway.
In summer 1997, the timing just happened to be right for Daimler and Chrysler to get together with a stock swap (rather than a tender offer– buying the stock from the shareholders to cash them out– make them no longer owners of the stock). Nevertheless, the months-long merger talks had to be kept secret because if the news was prematurely leaked, Chrysler’s stock price would skyrocket, making a deal prohibitively expensive.
Read the book to learn what, in summer 1999, prompted the following: “His aides had never seen Kirk Kerkorian so mad. In two days he lost almost $600 million on his Daimler Chrysler stock” plus all the other details of the whole story.