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