Crisler Corporation. Senior thesis

At the same time, Chrysler has very a good market in North America and can facilitate Daimler-Benz’s deep penetration into that market with a new program of minivan production.

Decrease in Price of Materials Bought from Suppliers

One major benefit of the merger is that both companies can save lots of money on external purchases. First, saving will take place in purchasing raw materials from suppliers. Before the merger, both companies had to buy from supplier separately. Everyone knows this law of the market:

“the more you buy, the less you have to pay.” Now the companies purchase everything together and the quantity of one batch is doubled, this bad led to significant decrease in price on per-unit basis. For example,

DaimlerChrysler already saved $1.4 billions in 1998. In turn, decreases in price for raw materials will provide lower prices for the cars in total and increase compatibility of the new company.

Decrease in R&D expenses per production unit

Another positive aspect of the merger is that both of the companies can combine their efforts in researching and developing new products.Before the merger each of the companies had to conduct research for itself and these costs were spread on per unit basis among all products. Now these costs are spread on a significantly larger quantity of products, which allows decreasing costs of the research and development per every production unit. In addition, intellectual powers of both companies will now work for one huge company—DaimlerChrysler. This factor will bring new, combined ideas into the new company.

Facts:

“On April 17, 2000, DaimlerChrysler announced a new Virtual Reality Center in Sindelfingen, Germany. The Company estimates the new facility will reduce costs of making Mercedes-Benz prototype models by up to twenty percent a shorten product development times while improving quality.”

Confluence of Technologies of Both Corporations

Both of the companies have their own advantages, in terms of technological development. Now, when all these advantages represent one solid company, the new company has more chances for surviving in the car manufacturing industry. The following are evidences of recent innovations in DaimlerChrysler.

“DaimlerChrysler researchers in Ulm, Germany, have developed an infrared-laser night vision system that significantly increases a driver’s visibility at night. The system allows drivers to recognize darkly clothed pedestrians and cyclists even at great distances. It also illuminates the road ahead over a distance of around 500 feet without blinding the drivers of oncoming vehicles.

The system functions as follows: two laser headlights on the vehicle’s front end illuminate the road by means of infrared light that is invisible to the human eye. A video camera records the reflected image, which then appears in black and white on a screen located directly in the drivers’ field of vision, or else as a so-called head- up display on the windshield.”(Auburn Hills, April 5, 2000)

Double Strength of New Corporation

One of the factors that investors are looking for before making their investment decision is a company’s overall stability. Usually the large corporations are considered to be stronger than small ones.

The new size of DaimlerChrysler might lead to more stability, which in turn could mean lower rates of return required by investors. It might be one of the new savings aspects of the company.

Market concerns

The automotive industry has seen increased global consolidation over the past two years, The New York Times reported. According to industry analysts, the consolidation is fueled by three major trends: brands growing in importance, manufacturers forging into difficult markets, and rising costs of technology. While many industry experts see the consolidation as inevitable and strategically beneficial, some analysts warn excessive consolidation could lead to diminishing choices and higher prices for consumers.

The Daimler-Chrysler merger is one of the few examples when the merger benefits the competitiveness of the market. Chrysler Corporation manufactures lower-range trucks, minivans, and sport utilities, when

Daimler-Benz majors in high-priced vehicles. No significant overlap in production will take place. Since both of the companies specialize in different areas, neither of them will have to give up on some of their production. “There was no real overlap in products –they filled in each other’s blank spaces” said David Cole, the head of the University of