Chrysler Corp. and Daimler-Benz confirmed Thursday that they will merge in a $92 billion deal that will change the automaking industry and give both companies a bigger stake in the global market.
The new company, Daimler-Chrysler, combines a German luxury carmaker with the No. 3 U.S. automaker that once trumpeted a "Buy American" slogan. Some analysts doubted that dealerships will sell Mercedes-Benz models side-by-side with Chrysler minivans.The merger will give Chrysler greater access to the European mar-ket, something it has strived for. Daimler-Benz, meanwhile, would gain a bigger foothold in the American market, where it has tried to boost sales.
And since two of every three vehicles that Chrysler makes is a light truck, the German company may very well participate in the popular pickup and minivan segments that haven't made as much sense for a luxury brand.
"Both companies have product ranges with world-class brands that complement each other perfectly," said Chrysler's chairman, Robert Eaton. But, he added, the companies will "maintain the current brands and their distinct identities."
Jurgen Schrempp, chairman of Daimler-Benz, called the merger "historic" and said it would change the industry.
"Both companies have dedicated and skilled workforces and successful products, but in different markets and in different parts of the world," he said in a joint statement with Eaton. A combination gives the companies a "preeminent strategic position in the global mar-ket-place."
Directors of both companies have approved the deal, which is expected to be completed by the end of this year if approved by shareholders, the Daimler-Benz supervisory board and government regulators.
The transaction sets an exchange ratio of 0.547 Daimler-Benz shares for each Chrysler share, leaving Daimler-Benz shareholders in control of 57 percent of the new company and Chrysler share-holders with the rest.
DaimlerChrysler will be jointly led by Eaton and Schrempp. The new company will have two headquarters - in Auburn Hills, Mich., and Stuttgart, Germany - and will employ 422,000 people worldwide.
No plant closures or layoffs were planned, the companies said.
Analysts said a deal makes sense. The companies could blend research and development arms to speed products to market, save costs and even use the same vehicle frames to create Mercedes and Chrysler vehicles.
Phil Gott, an analyst at DRI McGraw-Hill, said U.S. car sales will grow very slowly, if at all, over the next five years.
"So in order to grow their business, Chrysler does need to go global, and Mercedes gives them access to Europe and other parts of the world quite easily," he said.
The companies together will form a much greater industry presence. If wholly merged, they would have had revenues of $131 billion last year - $70 billion for Daimler-Benz and $61 billion for Chrysler.
By comparison, No. 1 world automaker General Motors Corp. had nearly $178 billion in revenue last year and No. 2 Ford Motor Co. had $154 billion.
The move marks a stark change from Chrysler officials' past advocacy of "Buy American," especially prevalent after the company went to the brink of bankruptcy in 1979 before a government bailout.
Chrysler is a powerhouse in the United States, with 94,300 employees and a 16 percent share of new vehicle sales this year. Only GM and Ford sell more, with shares of 31 percent and 24 percent, respectively.
Daimler produces luxury autos, trucks and buses via its Mercedes-Benz division. Other Daimler divisions are involved in areas like aerospace, defense and financial services.
Automotive history-making deal
Chrysler Corp. and Daimler-Benz AG confirmed Thursday they have decided to merge. A look at the two companies:
The No. 3 U.S. automaker but has been the industry's pioneer in selling minivans and sport utility vehicles. It has been selling off non-automotive holdings in recent years.
1997 sales: $58.6 billion
1997 earnings: $2.8 billion
Headquarters: Auburn Hills, Mich.
Manufacturing locations: Primarily the United States; also in Belgium, Singapore and South Africa
Best known for its Mercedes-Benz cars and trucks; also makes rail systems, aircraft propulsion systems and automotive electronics and provides financial, telecommunications and information systems services.
1997 sales: $68.97 billion
1997 earnings: $4.47 billion
Headquarters: Stuttgart, Germany
Manufacturing locations: Around teh world, including the United States