Why Daimler Should Merge with Fiat Chrysler Automobiles - Mercedes Benz SLK Forum
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#1 Old 09-10-2015
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Why Daimler Should Merge with Fiat Chrysler Automobiles

I know... I'm about to get a new egg & tomato attire from our American readers just for writing that title. As nearly every car guy probably agrees, the defunct DaimlerChrysler "merger of equals" is still part of our collective memory and it left a sour taste for everybody involved.

That said, I urge you to put down the pitchforks for a few minutes and read on to get a view of how this seemingly absurd idea might not only work for an Italo-German-American carmaker, but could also shake things up at the very top.

Currently, that "top" only includes Toyota, GM and Volkswagen, which we can all agree that are looking pretty healthy. But, as GM has already shown in 2009, no one is actually "too big to fail."

To better understand why a Daimler-FCA merger would work, I think we have to first take a good look at why the DaimlerChrysler "marriage made in heaven" didn't. Back in 1998, the news that Daimler-Benz would merge with Chrysler Corporation caught almost every analyst by surprise. It made no sense for a luxury carmaker to unite with a mainstream one in the quest for profit.

Just think about it, BMW had bought the Rover Group in 1994 and was yet to see a penny as a return from that investment four years later. So why did Daimler-Benz's CEO at the time, Jurgen Schrempp, think it would be a good idea to mimic BMW after seeing his rival trying and failing to hit two birds with one stone?

Well, while everyone was just waiting for BMW to sell Rover and get rid of the deadweight in its fight with Mercedes-Benz, the boys and girls in Stuttgart had a much bigger plan in mind, which was essentially seen as nothing short of world domination.

Schrempp was actually attempting to create what was to become known as a "Welt AG," or a global corporation that dominated every car market. Chrysler was mainly the gateway to the U.S. market, while the controlling stake that DaimlerChrysler had in Mitsubishi until 2005 was supposed to give the Germans a strong foothold in Asia – or Japan, specifically.

Unfortunately, we all know how this great plan turned out in the end, with Daimler selling off all its shares in both Mitsubishi and Chrysler at a loss of both image and money. Mercedes-Benz lost sales to both BMW and then Audi partly because of the costly strategy of pumping money into the Chrysler and Mitsubishi venture without getting anything in return.

Sure, nobody wants to talk about how the problems with Mitsubishi had actually started from a huge recall cover-up in 2000, or how platform-sharing between Mercedes-Benz and Chrysler suffered from huge delays and a severe lack of efficiency. Everyone talks about how the Germans pillaged Chrysler's technology and then left with all their profits (really?!?).

Anyway, after all was said and done, it was the current Daimler head honcho, Dieter Zetsche, who actually saved both Mercedes-Benz and Chrysler, at least if you look at the big picture – he was the president of both companies at certain points in time. Along with Sergio Marchionne, who is the main architect behind the (currently) successful Fiat Chrysler Automobiles holding company, Zetsche would probably make the perfect tag team in creating a new superpower in the automotive industry. Let's not forget Carlos Ghosn as well, who helped save Renault but especially Nissan and who is already in cahoots with Daimler.

So, try to think this through for a while before you form a hate-based opinion. A merger - done by the book this time - between FCA and Daimler, with the Renault-Nissan alliance tagging along, would spell big trouble for Toyota, Volkswagen and even GM. Sure, Marchionne is exhaustingly pushing for a merger between FCA and GM right now, but that is only because FCA may desperately need some deep pockets to support its planned expansion. Guess who has some of the biggest pockets in the industry, despite being a long way from selling as many cars as GM, for example?

That's right, Daimler, whose Mercedes-Benz lineup is increasing sales with a much larger pace than BMW or Audi. In short, FCA would have enough moolah to fully ressurect Alfa Romeo and Maserati, while Dodge/Chrysler/Jeep would finally benefit from some newer platforms.

Fun fact: the Chrysler 300, Dodge Challenger and the Dodge Charger are all based on a platform that uses old Mercedes-Benz-designed parts, including some that were borrowed from the S-Class W220, E-Class W210 and E-Class W211. Most of them have been obsolete for quite a while now, and are part of the reason why the Challenger weighs as much as a large SUV.

So, Daimler would receive the volume it cannot pursue with a brand like Mercedes-Benz - even though in recent years it has been trying to convince us of the opposite – and the friendship of the Americans if it all works out as it should. Getting to own or control Ferrari and Maserati would be the cherry on the top for Stuttgart, especially since along with Jeep they are pretty much the only FCA brands that currently make good money. FCA, on the other hand, would get the angel investor it deserves and actually wants, since there would be no overlap between FCA's lineups and Daimler's lineups.

This is actually the biggest reason for which a FCA-GM merger would not work, nor it would with any other large carmaker from the big three. FCA simply has too many overlapping models with its main competitors. Not to mention that GM (if it would ever go for it, which it doesn't) would probably trim the fat by simply closing down FCA brands that require huge investments to turn profitable. Daimler, on the other hand, would have fewer-to-none motives to do that, since it has plenty of money and none of the FCA car brands are actually a direct competitor.

In short, I think that a Daimler-FCA merger would be the "marriage made in heaven" that DaimlerChrysler hoped to be.

Berliner Heckflosse is offline  
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