7. If Ford was so successful in working with Mazda, why should DaimlerChrysler have any concerns about working with Mitsubishi? In 2004 DaimlerChrysler’s efforts to become a global car manufacturer were in serious trouble, and the company was considering a new Asian strategy

(Mackintosh, 2004b). Its presence in the Asian market decreased when it abandoned its Japanese affiliate, Mitsubishi Motors, to bankruptcy or takeover. Its relations with Korean auto maker Hyundai Motors, in which it holds a 10% equity stake, had already broken down (Mackintosh et al., 2004). In the United States its Chrysler arm was not performing to expectations, with an overall net loss since its acquisition. While the Mercedes division continued to make money, DaimlerChrysler overall had weakening profits and a small loss in 2001, primarily due to the Chrysler arm

(Edmondson and Kerwin, 2003). This led to a 50%

decline in the value of its stock (Mackintosh, 2004a).

DaimlerChrysler’s CEO, Jurgen Schremp, was under increasing criticism from stockholders, including the second largest asset management fund in Germany

(Edmondson, 2004).

DaimlerChrysler AG had been formed in 1998 by the combination of Germany’s Mercedes-Benz and the US’s Chrysler Corporation. Originally described as a merger of equals, subsequent events demonstrated that it was actually an acquisition with power held by the German company. The acquisition, which had been strongly pushed by Mercedes-Benz CEO Jurgen Schremp, created the world’s third largest automobile manufacturer, with Schremp as CEO. In 2000
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1, DaimlerChrysler spent over $2 billion in acquiring a 37% (controlling) interest in Mitsubishi Motor Company of Japan, a 10% stake in Korea’s Hyundai Motors, and outright purchase of Detroit Diesel Corporation, a US manufacturer of truck engines. The acquisition strategy fitted Schremp’s vision of creating a global powerhouse offering a full range of cars. A number of other automobile manufacturers were also extending the breadth of their offerings during the same period.

The emphasis on providing a wide range of automobiles was a change from earlier in the 1990s, when the objective of a number of companies had been to produce a ‘global car’ that could be sold to specific market segments across all key world markets. Though several car companies including Mercedes-Benz had achieved varying degrees of success with this approach, it had limitations in a world with differing tastes and income distribution.