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History of DaimlerChrysler
DaimlerChrysler AG, one of the world’s largest manufacturers of cars and trucks, formed in 1998 when German industrial giant Daimler-Benz AG merged with American automobile manufacturer Chrysler Corporation. DaimlerChrysler manufactures the Mercedes-Benz line of German luxury automobiles as well as vehicles under the American brand names of Chrysler, Dodge, Plymouth, Eagle, and Jeep. Besides automobiles and trucks, DaimlerChrysler also manufactures aircraft and aircraft engines, satellites and space systems, guided missilesand weapons systems, trains, electronics, and home appliances. Production of automobiles, however, remains the company’s core business. DaimlerChrysler maintains headquarters in Stuttgart, Germany, the original home of Daimler-Benz, and in Auburn Hills, Michigan, the original headquarters of Chrysler.

Daimler-Benz sprang from the simultaneous development of the internal-combustion engine in the 1880s by Karl Benz and Gottlieb Daimler, two engineers who founded separate companies (see Automobile Industry: The Internal-Combustion Engine). Benz and Daimler never met, but their companies, Daimler Engine and Benz & Companies, became successful manufacturers of automobiles. In 1885 Benz built a three-wheeled vehicle with an internal combustion engine, the first practical gasoline-powered automobile. In 1900 Emil Jellinek, the consul general of Austria-Hungary, financed Daimler’s production of a new high-performance car on the condition that it be named after Jellinek’s daughter Mercedes. In 1906 Daimler hired as his chief engineer Ferdinand Porsche, who would produce many influential design innovations and who later conceived the Volkswagen (see Volkswagen AG). When Daimler merged with Benz in 1926, the Mercedes-Benz line of automobiles was born.
Consistently successful in early automobile racing, the company progressed rapidly until World War II (1939-1945), when the state took over the German auto industry. Daimler-Benz became part of the German war effort, producing trucks, tanks, and aircraft engines. Although the war destroyed 70 percent of its production capacity, the company successfully rebuilt in the 1950s and became the largest automaker outside the United States and the world’s premier producer of luxury cars.
Competition from Japanese car manufacturers prompted Daimler-Benz to expand and diversify in the 1980s. The company moved into industrial technology with the acquisition of AEG, a manufacturer of electrical products, and into aerospace by buying control of Dornier, a manufacturer of space systems and commuter planes. In 1992 the company gained control of Fokker, a Dutch airplane manufacturer. With the luxury-car market growing increasingly competitive, and the defense and industrial sectors dampened in part by the reunification of Germany, the diversification strategy resulted in losses of $1.3 billion in 1993. The company began restructuring, cutting costs, and eliminating jobs, particularly in the aerospace sector.

Still struggling in 1995, the company lost $3.9 billion. However, its automobile division, which accounted for two-thirds of the company’s business, regained profitability. In the early 1990s Mercedes opened car plants in the United States, India, and China in an effort to cut labor costs and open markets.
In 1920 Walter P. Chrysler, then 45, resigned as an executive at General Motors Corporation because of differences with the company’s president, William C. Durant. After restoring automaker Willys-Overland to financial health in 1920, Chrysler joined the struggling Maxwell Motor Corporation. With the aid of three engineers, he designed the Chrysler Six automobile for Maxwell. Introduced in 1924, the low-priced car featured four-wheel hydraulic brakes and a high-compression, six-cylinder engine, previously unavailable in an affordable car. The car was a success, with 32,000 sold in its first year.
Maxwell Motor became Chrysler Corporation in 1925, with Chrysler as president. The company concentrated on product innovation, introducing models with a top speed of about 130 km/h (about 80 mph)—twice the top speed of Ford’s Model T. In 1928 Chrysler acquired Dodge Brothers Motor Car Co., an automaker founded by brothers John and Horace Dodge. The acquisition significantly increased Chrysler’s size and allowed it to spend $75 million to build its own manufacturing plants. That year the company also introduced the affordable Plymouth and the upscale DeSoto. In 1933 Chrysler surpassed Ford in sales for the first time. Walter Chrysler retired from the company in 1935 and died in 1940.
After the United States entered World War II in 1941, Chrysler produced tanks, army trucks, engines for B-29 bomber airplanes, antiaircraft guns, and other equipment for Allied forces. For almost a decade after the war, while other companies designed new cars and added features, Chrysler introduced few new models. By the early 1950s Chrysler had slipped to third place among U.S. automakers. In the 1960s the National Aeronautics and Space Administration (NASA) chose Chrysler to produce Saturn 1 and Saturn 1B booster rockets, used in the first successful U.S. spaceflights.

Chrysler frequently misjudged consumer tastes and needs. In the 1950s it introduced boxy cars while GM and Ford launched sleek-looking models. In the early 1960s the company launched small cars just as consumers began to demand power and luxury. With oil prices high in the early 1970s, Chrysler maintained its line of large, inefficient cars. As a result, Chrysler’s share of the U.S. automobile market dropped from 21 percent in 1952 to just 9 percent in 1979. The company suffered severe financial losses throughout the 1970s.
In 1978 the company hired former Ford president Lee Iacocca as its president and chief executive officer. In 1980, as Chrysler faced bankruptcy, the federal government agreed to guarantee $1.5 billion in loans to keep the company afloat. The bailout was unpopular among many Americans, but Iacocca appeared on television and made speeches to explain Chrysler’s position. His efforts helped win support for the company, which paid back the loans in 1983, seven years early.
In the early 1980s Chrysler closed several plants and laid off thousands of workers. At the same time, it introduced a successful line of new vehicles, including Chrysler K-cars, the Dodge Aries, the Plymouth Reliant, and the LeBaron convertible. In 1984, the year it introduced the best-selling Dodge Caravan and Plymouth Voyager minivans, Chrysler earned record profits of $2.4 billion. In 1987 Chrysler acquired American Motors Company, maker of Eagle cars and four-wheel drive Jeeps. The company diversified by buying aerospace and rental-car businesses, but it sold these and other noncore businesses in the 1990s.

In 1991 the company lost $795 million due to poor sales during an economic recession. But from 1992 to 1995, the company increased its revenues based on the strong sales of its minivans and Jeep Grand Cherokee. In 1997 a month-long strike by 1,800 workers at a key engine plant in Detroit caused the company to lose $450 million. The strike was the longest at a Chrysler plant in 30 years.
    IV MERGER     In 1998 Daimler-Benz acquired Chrysler Corporation for $38 billion, representing one of the largest industrial mergers in history. Analysts of the automobile industry observed that the new company combined Daimler-Benz’s attention to quality with Chrysler’s low-cost manufacturing strategies. The merger also positioned DaimlerChrysler for expansions into Asian and Latin American markets, where analysts predict significant future growth in the automobile industry. At the same time, Daimler-Benz’s distribution network allowed the company to rapidly expand the Chrysler automobile lines to markets in Europe.
Many economists considered the creation of DaimlerChrysler an indication of the advantages and challenges of a global economy. For example, the merger allowed the companies to cut costs by combining many of their research, production, and marketing efforts. However, the original German and American companies also faced significant differences in corporate tradition and national culture. Daimler-Benz, for example, was known for its highly complex and stratified management structure, whereas Chrysler had worked hard during the 1980s and 1990s to develop into a streamlined, profit-driven organization. Despite these differences, the merged company expected to reach a much wider range of customers with a fully diversified line of passenger cars, trucks, and utility vehicles.