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Merging IT at DaimlerChrysler

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Merging the companies proved to be a challenge, one in which IT was seen to be the solution. In the next nine years after the union, DaimlerChrysler strengthened its supply chain, customer relations, and all other aspects of a profitable business. However, in the end, the company lost money and its place as one of the world’s top car companies. This was blamed on cultural diversity and the fact that the cultures never merged because the company failed to realize its value at the onset. In May 1998, Robert J. Eaton, CEO of Chrysler Corporation, and Jurgen E. Schrempp, Daimler-Benz CEO, announced to the world that Chrysler and Daimler would be merging. It was trumpeted as historic, ‘a merger of equals’, a ‘megadeal’. At that time, both companies were leaders: Chrysler was the number 3 car company in the US with mass-market appeal with its Dodge Ram, Jeep, and LH Sedan Series. Daimler-Benz was the lead of the European luxury vehicle market with its Mercedes Benz. There was no overlap of product lines. The combined earnings in 1997 were $4.6 billion. The deal was predicted to be synergistic (Vlasic, et al. 1998), with Daimler applying Chrysler’s expertise in production to its operations and product development. Daimler-Benz hoped that Chrysler, which earned more per vehicle than any other carmaker in America, could help it cut spending and costs, and improve profits. Reduction in costs was targeted up to $3 billion yearly, a third of which could be from purchasing costs.In July 2000, signs of trouble became eminent when DaimlerChrysler stock plunged from a high of $103 to $53, a $49 billion drop in market value. The predicted savings due to more efficient technology sharing and purchasing technology was not realized (Tierney, et al. 2000). Information Technology (IT) was seen as the vehicle for this to be realized and DaimlerChrysler put its best efforts to save the merger by hinging on IT.The business model for Mercedes, the primary brand of Daimler-Benz, was based on manufacturing and engineering cars in a continuous improvement manner.