| Back in 1998, experts called Daimler and | | | | truly believed that Daimler could become |
| Chrysler's union a marriage 'made in | | | | an integrated powerhouse if Mercedes and |
| heaven.' But about a decade after, the | | | | Chrysler shared more engineering costs |
| perfect union has reached a critical | | | | and high-volume parts. He strived hard |
| juncture. How did the union hit the | | | | for more cooperation, and initiated the |
| rocks? | | | | development of common platforms for |
| On Sept. 15, DaimlerChrysler AG's CEO | | | | small-car and SUV product lines. |
| stunned the world by forecasting a $1.5 | | | | Nonetheless, the joint projects only |
| billion third-quarter loss for the | | | | underscored the huge differences between |
| Chrysler Group. The executives know they | | | | a Mercedes and a Chrysler. While |
| are all in trouble but nobody has ever | | | | engineers could unite, they could not |
| imagined how grave the trouble could be. | | | | change the fact that a small Mercedes |
| After a number of profitable quarters, | | | | car sells for double the price of a |
| Chrysler had collapsed inwardly. Its | | | | Chrysler compact. |
| erratic sales performance triggered | | | | Many Mercedes auto parts were simply too |
| Daimler's decision to sell it off before | | | | expensive to be part of a Chrysler |
| it capsizes the whole company. Chrysler | | | | vehicle. Still, Zetsche insisted. One |
| would be sold for $7.4 billion to | | | | German exec recalled challenging the |
| private-equity giant Cerberus Capital | | | | idea that integration could work. "Thank |
| Management. | | | | you for your opinion," Zetsche told him. |
| But with the said decision, pressure | | | | "I have a different one. We will go on |
| intensified. It does not only mark the | | | | with the cooperation." |
| failure of a merger but also includes a | | | | While Daimler struggled to solve its |
| bunch of other struggles. Inventories of | | | | Chrysler problem, the company's |
| unsold product lines were suffocating | | | | shareholders were swiftly losing |
| the dealers. Also, negotiations on the | | | | patience. Influential shareholders |
| new company policies are choking | | | | pressed Zetsche and Bodo Uebber, |
| workers. "It shows the problems of the | | | | DaimlerChrysler's chief financial |
| fusions of big companies," said Willi | | | | officer, to sell Chrysler. "Zetsche's |
| Diez, the head of the Germany-based Auto | | | | pressure comes from so many different |
| Industry Institute. "You have cultural | | | | constituencies telling him they're sick |
| differences. You have the problem of who | | | | to death of Chrysler," said John Lawson, |
| really runs the company." | | | | a London-based analyst at Citigroup. |
| In interviews with a number of | | | | In private, Zetsche was ratcheting up |
| individuals close to Daimler to | | | | the pressure on LaSorda and his team. No |
| reconstruct pivotal events leading up to | | | | one felt the pressure more than Joe |
| the May 14 sale of Chrysler, most spoke | | | | Eberhardt, a former Mercedes exec who |
| on the condition of anonymity. | | | | was in charge of Chrysler sales and |
| When Zetsche became Daimler's CEO, no | | | | marketing. Eberhardt had alienated many |
| one thought he would sell Chrysler. Like | | | | Chrysler dealers with his autocratic |
| power antennas, Zetsche was famed for | | | | style during the terrible summer of |
| efficiently leading Chrysler's path to | | | | 2006. He resigned on Dec. 5. |
| solidify the merger. But Zetsche became | | | | Early this year, Zetsche appeared |
| ultimately disappointed by the lack of | | | | reconciled that a sale was the best |
| synergies between Chrysler's mass-market | | | | option. "It took him awhile to get to |
| vehicles and the luxury product lines | | | | this decision, that it was right for |
| built by Mercedes-Benz. As a result, | | | | Daimler and Chrysler to separate," said |
| Chrysler inventories became bloated and | | | | a person close to Zetsche. Valentine's |
| heavy incentives failed to push vehicles | | | | Day 2007 was supposed to mark a fresh |
| off dealer lots. The warning on Sept. 15 | | | | start for Chrysler simply because the |
| turned concerns about Chrysler into a | | | | marriage was officially headed for a |
| full-scale predicament. | | | | divorce. |
| People close to Zetsche said that he | | | | |