Daimler Crysler Case Study

DaimlerChrysler

B BUS 300

March 05, 2006

Table of Contents

TOC o "1-3" h z u HYPERLINK l "_Toc130024939" Introduction PAGEREF _Toc130024939 h 3

HYPERLINK l "_Toc130024940" Organizational Size, Life-cycle and Control PAGEREF _Toc130024940 h 3

HYPERLINK l "_Toc130024941" Organizational Structure PAGEREF _Toc130024941 h 7

HYPERLINK l "_Toc130024942" Cross-functional teams PAGEREF _Toc130024942 h 9

HYPERLINK l "_Toc130024943" Recent Product Innovations PAGEREF _Toc130024943 h 10

HYPERLINK l "_Toc130024944" Innovation Process PAGEREF _Toc130024944 h 11

HYPERLINK l "_Toc130024945" Conclusion PAGEREF _Toc130024945 h 14

HYPERLINK l "_Toc130024946" References PAGEREF _Toc130024946 h 15

Introduction

In 1998, the merger between US-based Chrysler German-based Daimler Mercedes formed the company known today as DaimlerChrysler. The merger caused rapid growth as well as numerous challenges that the company still needs to overcome. Currently, the organization is in the elaboration phase of organizational growth, marked by the need for revitalization, more efficient decision making, and reducing redundancies in the organizational hierarchy. As it faces merciless competition of the automotive industry, the company is implementing structural changes geared towards making the company more efficient in its day-to-day operations, and allowing it to produce innovative products, thus setting it apart from the competition.

This paper starts out with a discussion of DaimlerChrysler’s current phase of organizational development and some of the key challenges that the company is facing today, followed by a discussion of recent organizational structure changes aimed at overcoming these challenges. Next, we describe the use of cross-functional or “innovation” teams and how this approach can reduce organizational deficiencies at DaimlerChrysler. Finally, we conclude with a description of cutting-edge, innovative products that the company has produced recently, and the process of managing innovation and creativity at DaimlerChrysler.

Organizational Size, Life-cycle and Control

In 1998, DaimlerChrysler was formed as a result of the merger between Chrysler and Daimler-Benz, even though many stockholders did not wanted the merger to take place because Chrysler was not meeting its financial goals with its line of vehicles. These stockholders believed that the merger will further devaluate the stock. So Chrysler was faced with the internal problem of meeting profitability goals and not going out of business, as well as the external problem of many of the company’s stockholders opposing the proposed merger (Wikipedia.org, 2006).

Right after the Daimler-Benz and Chrysler merger, the organizational growth was stable; yet the company went into a financial disaster soon after the merger, “greatly depressing the stock price of the merged firm and causing serious alarm at headquarters in Germany, which sent new CEO Jurgen Schremp to take charge” (Wikipedia.org, 2006).

In 2000, DaimlerChrysler was facing stiff competition and an incentive war which was forcing them to discount their vehicles. The large part of the company’s competition, Japanese automakers, were able to obtain the competitive edge in production efficiency and ability to deliver innovative products to market in record time (Kano, Levinstein, 2006). In order to maintain its market share, DaimlerChrysler needed to revitalize the company by implementing a series of organizational and cultural changes.

In January 2001 the company has announced the biggest restructuring plan due to the high pressure of European and Asian auto makers. They planned to cut auto production by 15%, lay off 26,000 workers and idle six factories in North and South America hoping that cutting capacity will relieve the profit draining discounts (Ball, 2001). These changes were designed to primarily “stop the bleeding” of profit losses. Similar drastic measures have been implemented by other major automakers, namely Ford and GM, in order