Реферат: Crisler Corporation. Senior thesis
1.<span Times New Roman"">History of Chrysler Corporation
2.<span Times New Roman"">History of Daimler-Benz Corporation
3.<span Times New Roman"">Short Summery of Current Positionof DaimlerChrysler
4.<span Times New Roman"">Reasons for Merger and NewOpportunities
5.<span Times New Roman"">Opportunities in New Markets
6.<span Times New Roman"">Decrease in Price of MaterialsBought from Suppliers
7.<span Times New Roman"">Decrease in R&D Expenses perProduction Unit
8.<span Times New Roman"">Confluence of Technologies of BothCorporations
9.<span Times New Roman"">Double Strength of the NewCorporation
10.<span Times New Roman"">MarketConcerns
11.<span Times New Roman"">NewCorporation
12.<span Times New Roman"">Achievementsof the New Corporation
13.<span Times New Roman"">Surveyof Recent Stock Performance
14.<span Times New Roman"">Commentson some of Financial Ratios of the New Corporation
15.<span Times New Roman"">GovernmentConcerned that…
16.<span Times New Roman"">EnvironmentalIssues in the New Corporation
17.<span Times New Roman"">Conclusion
History of ChryslerCorporation
It would be true to say that Chrysler Corporation wasborn long ago before the year 1925 (when it was officially established). It was started as a result of Walter P.Chrysler’s efforts to create a car that would be affordable and competitive inthe market. The first car would incorporate four-wheel hydraulic brakes and ahigh-compression six-cylinder engine.
In 1924, New York for the firsttime saw a car that became the ancestor of all generations of Chrysler’scars. It was the Chrysler Six. The car was not allowed to be presented atthe New York Automobile Show, because it was not in production. But to put it in production Walter Chryslerneeded to raise external funds. Eventually he came up with a very inventive idea—to park his car infront of the building in which the show took place. Going to the show, exhibitors and investorshad a chance to see the Chrysler Six. Chrysler’s efforts led to success—a Chase Security Banker underwrote afive million dollars issue of Maxwell Motor Corporation (the company of whichWalter Chrysler was a chairman) debenture bonds to finance futuredevelopment.
In a year Walter Chrysler purchased Maxwell MotorCorporation, renamed it to Chrysler Corporation and became the only owner ofit. The new company was growing very fast. By the end of the year Chrysler Corporation had 3800 dealers in theUnited Stated alone. The profit thatyear was about $17 million.
In 1934, the company introduced Airflow to the market. This car was a result of engineer CarlBreer’s and Orville Wright’s work. Theyhad been working on a new generation of cars with a teardrop front. Unfortunately this car did not matchcustomers’ tastes. However the companyrecovered thanks to innovations like ball bearings treated with Superfinish, aforerunner of the automatic transmission (fluid Drive), and the color-coded“Safety-Signal” speedometer. The companycontinued this success in 941, when it introduced the luxury-oriented Town& Country wagon. This was thecompany’s first minivan with nine-passenger seating and a rear hatch. Besides that, it was the first minivan withgenuine wood exterior panels. This modelwas in big demand.
On August 18, 1940, the company was shaken by grief: ChryslerCorporation’s founder, Walter P. Chrysler, passed away.
In 1955, Chrysler Corporation debuted its “masterpiece”—Chrysler C-300. This car was themost powerful full-size car in the world, and soon won twenty out of fortyraces conducted in 1955.
Chrysler Corporation played a big role in production formilitary service during World War II. The company’s full capacity was directed toward production of tanks and40mm trailer-mounted anti aircraft guns. In total, Chrysler participated in sixty-six military projects that wereworth of more than 3.4 billion dollars between 1940 and 1945.
With the beginning of the era of space conquest, the ChryslerCorporation actively participated in the construction of powerful engines usedto launch astronauts into orbit. NASAchose Chrysler to construct the Saturn 1 and Saturn 1B launch vehicles, whichwere assembled at its plant in Louisiana.
In May of 1998, an event took place that led to huge changesin the auto world. Two of the world’smost profitable car manufacturers, Daimler-Benz and Chrysler Corporation,agreed to combine their businesses in an equal merger.
On October 1,1883, Karl Benz started his own company, which was called Benz & Cie,Rheinishe Gas Motor Enfabrik. Benz’s cars increased in popularity after hestarted to build multiple cylinder engines with 16 horsepower, which increasedthe speed. The sale of automobiles was increasing every year. In the single year of 1901, Benz & Ciesold 2,702 vehicles. By that time, Benzwas selling his vehicles in France, England, Russia, United States, andSingapore. Two years later at the age of60, Karl decided to retire from the car business and the company was taken overby his sons, Eugen and Richand. On April4, 1929, at the age of 84, Karl Benz passed away at his house atLadenburg. At the present time, KarlBenz is considered to be a pioneer in car building in Germany and worldwide. In Germany, Benz is a history figure andoften there are signs at Mercedes dealerships, which say, “FatherBenz."
During WorldWar II both companies, Benz & Cie and Daimler-Mototern-Gesellschaft, wereordered to change their production lines for military purposes. Both companies stopped making cars and beganthe production of Benz & Cie aircraft engines. DMG was building the aircraft. 1916 was a dramatic increase the number ofemployees in Benz and DMG factories. Thenumber of workers of the Benz factories increased from 7700 to 12,000 and DMG’sworkers increased from 3750 to 16,000. When the war was over, thins became very difficult for the German carbuilders. Many car-building companieshad stopped production and had to close down their factories. Both Benz and DMG were greatly affected bythe war and by 1924, the presidents of both companies signed a mergeragreement, “Agreement of Mutual Interest,” which made them into one company.
During thistime, the Mercedes model became very famous and recognizable around theworld. Due to the increased popularityof the model Mercedes, the new company was named Mercedes-Benz. The name Daimler-Benz was used also. For the next decade, the Mercedes-Benzdominated the German automobile market. Mercedessales were much higher than the other German car companies, such as BMW andOpel.
In the early1930’s history repeated itself with the rise of Adolph Hitler. The management of Mercedes-Benz begangradually to lose control of the company. The new government brought the vehicle under strict regulation. The whole German car industry was taken overby the National Socialists. Hitlerannounced that the production of German cars would be “drastically reduced”(Kimer, p. 276, 1986). In the mid 30’sthe Mercedes-Benz factories were beginning to be used for militarypurposes. This idea was given by JakobWerlen, the former manager of Mercedes–Benz, who later became Hitler’s personaladvisor of transportation. Aninteresting fact is that Hitler had many kinds of cars, but whenever he wasphotographed in a vehicle, it was a Mercedes. One of Hitler’s favorite models was his parade car, type 770, the“Grosser Mercedes” (Kimer, p. 282,1986).
Wilhelm Kissel was a generaldirector of the company in the mid and late 30’s. He tried to keep his company free fromgovernment involvement, but this proved to be too difficult. By wartime, the Mercedes-Benz factories werebasically making military products. Bythe time Hitler started the war with the U.S.S.R., Mercedes-Benz was making allkinds of army equipment. The German armyneeded the best machines and Mercedes-Benz factories were producing planes,trucks, tanks, and various kinds of engines. The most famous Mercedes war product was a military plane calledMsserschmitt. This plane made theLuftwaffe the best airforce in the world. The Msserschmitt was considered the best plane at that time; it had aMercedes DB 600 engine, which made this plane much faster than any other planesin the world (Kimer, p. 283, 1986).
In1945, after the end of the war, all of the Daimler-Benz factories, much likethe rest of Germany, were ruined. AnAmerican reporter wrote about what he had observed in Germany right after thewar — “Cities were dead, factories idle bridges down, rails gone. Rubble was everywhere” (Kimer, p. 283, 1986).World War II completely destroyed Daimler-Benz, at one time the world’s largestautomobile company.
Ittook more than three years to rebuild the factories. However, many divisions of the company werelost because they ended up in East Germany. At first the company was rebuilding U.S. army vehicles. By 1949, over 6,000 cars had been built andthe main focus of Mercedes-Benz was again the production of luxury cars (Kimer,p. 290, 1986).
Within thenext two years, the company was completely rebuilt and the number of employeessince the beginning of the war was doubled. Now the number of workers was almost 40,000. By the year 1952, Mercedes-Benz had built100,000 cars and 250 in the United States. In 1955, the new models 220, 300, and 300S were introduced in aFrankfort Auto Show and the model 300S was named the car of the year. From that time, Mercedes started to exportmore cars around the world. However,most of the cars were sold in Germany (Consumer Guide, p. 32, 1986).
By 1960, theMercedes was the number one selling car in Germany, but at the same time, theBMW became a very close competitor. Mercedes lost a large share of the market to BMW. This was a time when the company started tolook for new markets. The United Stateswas a promising market for the Mercedes. In the early 60’s the company increased its sales to 50,000 cars sold inthe U.S. (Consumer Guide, p. 46, 1986)
However, inthe mid 60’s, the sales went down. Thenew 190D four-cylinder diesel model did not sell well in the U.S. andEurope. It took the company three yearsuntil it became one of the leaders of the market. In 1970, Mercedes introduced three newmodels, which they called the “New Generation.” The new models were 280S, 280SE, and 280SL. By that time, the Mercedes became the numberone imported car in England, France, Belgium, Holland, Switzerland, and Austria(Consumer Guide, p. 48, 1986).
Another reasonwhy the Mercedes became one of the most popular cars in the world was itsparticipation in auto racing. In thelate 60’s, Mercedes cars participated in nine races and won seven of them. After tremendous racing results, peoplearound the world wanted to purchase the C-111 model which would set up threenew world records; however, Mercedes would not make this available to thepublic for sale. The company wasreceiving a thousand letters a day with offers buy the C-111 model and in 1976the similar model C111-11 was introduced at the Geneva Automobile Show. The new model had tremendous power. It had 350 horsepower, and it could get fromzero to sixty mph in six seconds. Itstop speed was 190 mph. Also, the C111-11Diesel set a new record in durability by running at a speed of 156 mph for10,000 miles straight (Consumer Guide,p.55, 1986).
In 1982, the190 series was one of the best selling models in the world. The 190 model was a small sized car whichopened for Mercedes an entirely new market. In Germany, this model became a best selling car in 1985. This was a very important establishment forDaimler-Benz because the 190 model became the number one selling small car inGermany, leaving the long-time leader, BMW, in second place (Consumer Guide, p.64, 1986).
In the early1990’s, the Mercedes market share in the United States was greatlydecreased. The reason for this was thatthe Japanese car companies started to produce luxury cars. For example, Toyota was manufacturing Lexus,Honda was manufacturing Acura, and Nissan was manufacturing Infiniti. These cars today are becoming increasinglypopular among Americans. However, Germanmanagement found a way to overcome the competition by building a Mercedes factory in Alabama in 1994. Now, a large share of Mercedes cars sold inthe U.S. are produced by American labor. Producing Mercedes in the U.S. has solved many problems for thecompany. Many people in the U.S. have anopinion about buying American-made cars with the purpose of supporting theAmerican economy. The second problem wasthat tax on imports was greatly reduced. The cost of a German laborer was 50% higher than an American laborer inAlabama. By building cars in the UnitedStates, all these problems were solved (Fortune, p. 150, 1997).
Similarly,Mercedes used the same strategy in South America. It built a new plant in Brazil. This plant decreased the prices of the carsand made the purchase of a Mercedes more affordable for the South Americanregion (Motor Trend, p. 123, 1997).
In the pastfive years the demand for 4x4 vehicles has been increasing. Two years ago, Mercedes came up with a newM-class jeep model. The price of the isjeep is around $34,000, which is competitive with the American-made ChevyBlazer, Ford Explorer, and Grand Jeep Cherokee. By making a jeep, Mercedes is keeping up with its competitors for thisshare of the market. The new jeep is asuccess because it was named the 4x4truck of the year for 1998.Short summary ofcurrent position of DaimlerChrysler
Company ownership:European, U.S. and otherinternational investors own DaimlerChrysler; there are approximately onebillion shares outstanding. 65% is madeup of European investors.
GlobalStock:DCX ordinary shares are traded on the NewYork and Frankfurt stock exchanges as well as nineteen other major stockexchanges worldwide.
Group Headquarters:Stuttgart, Deutschland, and Auburn Hills, Michigan, USA.
Chairmen: Robert J. Eaton and Jurgen E. Schrempp
Management Board:Consists of fourteen members, including the two chairmen and the heads of theoperation and functional divisions.
Supervisory Board:Consists of ten shareholders’ representatives and ten employees’representatives. The Supervisory Boardappoints the Board of Management and approves major company decisions.
Market Capitalization:Currently about EUR 80 billion (March 1999)
Investments:1999-2001: EUR 46 billion to be invested in the future of DaimlerChrysler
Automotive Sales:4.5 million units in 1998 (Passenger Cars and Commercial Vehicles)
Employees: 466,900 at the end of 1999
Manufacturing Facilities:in 34 countries.
Global Brands:Mercedes-Benz, Chrysler, Plymouth, Jeep, Dodge, Smart, Freightliner, Sterling,Setra, Airbus, Eurocopter, Ariane, Debis and others.
Product sold:More than 200 countriesOfficial Language:English
Financial Reporting:US-GAAP accounting with earnings reported quarterly.
Reasons formerging and new opportunities.
In 1998, at the Detroit Auto Show, the idea of cooperation of Daimler-Benz andChrysler Corporation was born. Schrempp, Chairman of Daimler-Benz and Eaton,chairman of Chrysler Corporation, began negotiations about possible combinationof two large automobile manufacturers. “We are leading a new trend we believe will change the future, the faceof the industry,” Eaton said five months later when the deal wasannounced.
The two chairmen acknowledged that the merger would not beeasy. Their own study of transnationalmergers suggested that 70 percent failed to achieve the kind of success thathad been anticipated.
As a result of the long series of negotiations, a new company namedDaimler-Chrysler was established. Thecompany would manufacture not only cars, but commercial trucks, trains androckets as well.
The goal of the merger was to create a company that would be able tostand better against other world leading car producers like General Motors,Ford, Nissan, Volkswagen, Toyota and soforth.
With the creation of a newcompany, both of the old components were going to benefit from the following:
·<span Times New Roman"">Decreased R&D expenses perproduction unit
·<span Times New Roman"">Confluence of technologies ofboth firms
·<span Times New Roman"">Double strength in total
·<span Times New Roman"">Opportunities in new markets
·<span Times New Roman"">Decrease in price of materialsbought from suppliers
Opportunitiesin new markets
Both Chrysler Corporation and Daimler-Benz operate in quitesaturated markets (in terms of their current products). In order for them to grow, they will have tocarry on those overseas markets, which means development of products inaccordance with preferences of the new markets.
Developing new products for a different market segment orestablishing an additional brand might have implications for the positioning ofthe existing product range. Penetrationinto completely new market segments for both companies would involve both highcosts (new offices, stores, and advertisement programs) and substantial risksfor the companies.
Another method for successful penetrationand establishment in new markets is co-operation with another manufacturer whoalready has a successful brand and products in place in the segments where itis represented. In this way, theexisting product portfolio could be broadened without any risk to eachcompany’s brand identity and its associations of exclusiveness.
Daimler-Benz is well-known and recognized in Europe and USAfor its high-quality cars and has firm customers; however, the opportunitiesare limited. The newly industrializingcountries in Latin America and Asia, on the other hand, offer good prospectsfor growth—starting from a low level—to the premium products segment. To penetrate these fast-growing markets onany scale, however, it would be necessary to launch new, low-priced products,possibly combined with the creation of a new brand name. The new direction will certainly require newfunds and the company might not be able to handle this hard task alone. Another possible problem of penetrating thenew markets in Latin America and Asia is, was the establishment of new offices,stores, research of new customer’s’ tastes, and advertisement. To cope with this obstacle to its success,DaimlerChrysler seeks companies in those areas for possible merger, likeDaywoo, Mitsubisi and so forth.
Chrysler has not penetrated the European market verydeeply. It certainly will be a goodopportunity for Chrysler Corporation to start cooperation with Daimler-Benz inorder to penetrate the European market without additional costs for opening itsoffices and stores.
At the same time, Chrysler has very a good market in NorthAmerica and can facilitate Daimler-Benz’s deep penetration into that marketwith a new program of minivan production.Decrease in Price of Materials Bought from Suppliers
One major benefit of the merger is that both companies cansave lots of money on external purchases. First, saving will take place in purchasing raw materials fromsuppliers. Before the merger, bothcompanies had to buy from supplier separately. Everyone knows this law of themarket: “the more you buy, the less you have to pay.” Now the companies purchase everythingtogether and the quantity of one batch is doubled, this bad led to significantdecrease in price on per-unit basis. Forexample, DaimlerChrysler already saved $1.4 billions in 1998. In turn,decreases in price for raw materials will provide lower prices for the cars intotal 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 companiescan combine their efforts in researching and developing new products. Before the merger each of the companies hadto conduct research for itself and these costs were spread on per unit basisamong all products. Now these costs arespread on a significantly larger quantity of products, which allows decreasingcosts of the research and development per every production unit. In addition, intellectual powers of bothcompanies will now work for one huge company—DaimlerChrysler. This factor will bring new, combined ideasinto the new company.
“On April 17, 2000, DaimlerChrysler announced a new VirtualReality Center in Sindelfingen, Germany. The Company estimates the new facility will reduce costs of makingMercedes-Benz prototype models by up to twenty percent a shorten productdevelopment times while improving quality.”
Confluence of Technologies of BothCorporations
Both of the companies have their own advantages, in terms oftechnological development. Now, when allthese advantages represent one solid company, the new company has more chancesfor surviving in the car manufacturing industry. The following are evidences of recentinnovations in DaimlerChrysler.
“DaimlerChryslerresearchers in Ulm, Germany, have developed an infrared-laser night visionsystem that significantly increases a driver’s visibility at night. The system allows drivers to recognize darklyclothed pedestrians and cyclists even at great distances. It also illuminates the road ahead over adistance of around 500 feet without blinding the drivers of oncomingvehicles.
The system functions as follows: two laser headlights on thevehicle’s front end illuminate the road by means of infrared light that isinvisible to the human eye. A videocamera records the reflected image, which then appears in black and white on ascreen located directly in the drivers’ field of vision, or else as a so-calledhead-up display on the windshield.”(Auburn Hills, April 5, 2000)
Double Strength of New Corporation
One of the factors that investors are looking for beforemaking their investment decision is a company’s overall stability. Usually thelarge 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 ofthe company.
The automotive industry has seen increased global consolidation overthe past two years, The New York Times reported. According to industry analysts, theconsolidation is fueled by three major trends: brands growing in importance,manufacturers forging into difficult markets, and rising costs oftechnology. While many industry expertssee the consolidation as inevitable and strategically beneficial, some analystswarn excessive consolidation could lead to diminishing choices and higherprices for consumers.
The Daimler-Chrysler merger is one of the few examples when themerger benefits the competitiveness of the market. Chrysler Corporation manufactures lower-rangetrucks, minivans, and sport utilities, when Daimler-Benz majors in high-pricedvehicles. No significant overlap inproduction will take place. Since both ofthe companies specialize in different areas, neither of them will have to giveup on some of their production. “There was no real overlap in products –theyfilled in each other’s blank spaces” said David Cole, the head of theUniversity of Michigan’s Office for the Study of Automotive Transportation. In turn, this meant that there will be nodecrease in competition in the market place, which is one of the main concernsof the Federal Trade Commission when a merger takes place. (In a horizontalmerger, the acquisition of a competitor could increase market concentration andincrease the likelihood of collusion. The elimination of head-to-head competition between two leading firmsmay result in unilateral anticompetitive effects).
<img src="/cache/referats/3652/image002.gif" v:shapes="_x0000_s1027">
Another concern of The Federal Trade Commission and EuropeanCommission is the possibility of monopolization of the market. The automobilemarket is very large and diversified. For example, July 1999 car sales in the USA for the three largestcompanies are as shown on the graph:
Even after the merger,Daimler-Chrysler is not capable of keeping such a huge market under control. Asone can see on the above chart, Daimler-Chrysler (243420 vehicles) is on thethird place in production after General Motors (422029 vehicles) and Ford MotorCo. (355765 vehicles).
In the case of Chrysler Corporation and Daimler-Benz, the hazard ofcompetition decrease does not exist, because the companies produce differenttypes of cars. There would be a decreaseof competition if after the merger, one of the companies would have to give upsome of its production plans and eventually consumers would be hurt. Instead,it will just intensify competition in the car manufacturing world. On July 24 and July 31 of 1998, the EuropeanCommission and the Federal Trade Commission, respectively, approved the mergerof Chrysler and Daimler-Benz Corporation, and appearance ofDaimler-Chrysler. This merger isclassified as a “horizontal merger.”
In order to becomethe largest car-producing corporation in the world, Daimler-Chrysler has toacquire or merger with some other companies, and this is in fact, whatDaimler-Chrysler is looking at right now. On March 10, 1999, Daimler-Chrysler broke off talks about buying a stakein Nissan Motor of Japan, but it has not given up. On March 22, 1999, Schrempp held negotiationswith Japan’s Mitsubishi Motors about a possible merger. As it can be seen, the new corporation veryactively looks for partners in Asia, but the question that might rise soon willbe whether the next merger will be approved by the Federal TradeCommission.
Another fact thatmight alert the US government is that on February 25, 2000, General MotorsCorporation, Ford Motor Corp. andDaimlerChrysler jointly announced that they are planning to combine theirefforts to form a business-to-business integrated supplier exchange through asingle global portal. Some view thisfact as a slow movement towards market monopolization.
German-Americanautomaker DaimlerChryslter agreed on March 27, 2000, to buy a controlling 34%stake in Japan’ Mitsubishi Motors Corp. for 2.1 billion, extending itsinternational reach.
The agreement gives DaimlerChrysler accessto the Asian market and small-car expertise of Mitsubishi, Japan’sfourth-largest automaker. Carmakers areincreasingly seeking cross-border alliances as overcapacity prompts them to cutcosts through the sharing of parts and vehicle platforms with manufacturers ina range of markets.
DaimlerChrysler’s deal excludes Mitsubishi’strucks division, which has an alliance with Sweden’s AB Volvo. Together DaimlerChrysler and Mitsubishi willhave a combined market share of about 10.8% in Japan and 9.4% in other parts ofthe Asia-Pacific region. Daimler’spurchase gives it the right to veto board-level decisions at Mitsubishi.”<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[i]
Daimler-Chrysler provides a variety of transportationproducts and financial and other services. It operates seven business segments: passenger cars and trucks(Chrysler, Plymouth, Jeep, Dodge; 43% of 1998 sales), passenger cars(Mercedes-Benz, Smart; 23%), commercial vehicles (Mercedes-Benz, Freightliner,Sterling, Setra; 17%), aerospace (7%), services (6%), Chrysler financialservices (2%), and other (2%).
Daimler-Chrysler Corporation is primarily active in Europe,North and South America and Japan and is continuing to expand in markets suchas Eastern Europe and East and Southeast Asia (intensive negotiations withAsian companies are obvious evidences of that).
Another aspect of penetrating new markets is that developingnew products, opening new stores and offices, hiring managers, and trainingstuff requires a lot of funds. There aretwo ways of raising these funds: internal and external. Internal funds come from Retained Earnings. External funds come from loans, bonds,issuance of common stock and other sources. The merger would increase the amount of money in Retained Earnings thatcould be used in an expansion program. Through the pooling of resources, DaimlerChrysler will be excellentlyplaced to develop and introduce new products even more quickly into themarkets, thus gaining an edge over competitors.Achievements of the New Corporation
“DaimlerChrysler AG today reported a record operating profit of EUR11.0/$11.1 billion in 1999, the company’s first full year of operations. This is an increase of 28% compared to the1998 figure of EUR 8.6/$8.7 billion. Adjusted for one-time effects, principally the sale of debitel sharesand restructuring expenses at Adtranz, operating profit grew by 20% to EUR10.3/$10.4 billion. Operating profitthus outpaced revenues which rose by 14% to a record EUR 150.0/$151.0billion.”
<img src="/cache/referats/3652/image004.gif" v:shapes="_x0000_s1031">
Recently, the German financialmagazine “Capital” conducted a survey on the provision of shareholders’information on the Internet. The overallwinner was DaimlerChrysler, which was recognized as the best provider ofcompany information on the Internet.Survey ofrecent stock performance
Immediately after the merger, the stock price of the newcompany went up very drastically. Thereason for this is that investors strongly believe in the future success ofDaimlerChrysler.
Currently, the stock price is down. This fact can be explained by the generalperformance of the market, which is experiencing very sudden slumps. Many huge companies do not trade at all outof fear of prices drop. Below is the chartof stock price performance of the DaimlerChrysler since the merger.
<img src="/cache/referats/3652/image006.jpg" v:shapes="_x0000_s1029">
Below is a valuation of DaimlerChrysler by analysts atStandard & Poor’s.
“DCX has fallen sharply from its early 1999 peak. The automotive sector has been out ofinvestor favor for some time, with DaimlerChrysler contributing to the negativesentiment with its much lower than expected earnings in the secondquarter. Despite DCX’s attempt toportray the divergence from expectations as mostly accounting and temporaryitems, the honeymoon for investors and DaimlerChrysler is clearly over. DaimlerChrysler has a strong balance sheet,with significant cash reserves available for the next industry downturn, aswell as for strategic investments and alliances. With strong sales through September, weexpect 1999 domestic automotive volume, led by minivans and sport utilityvehicles, DCX strengths, to reach a record. Still, given negative investor sentiment and uncertainty in thecompany’s ability to meet financial objectives, despite a strong third quarter,we would not add to positions.”<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[ii]
Comments onsome of the Financial Ratios of the New Corporation
As the ratios reveals newcorporation by some of the ratios overcome industry average. Valuation ratios show us DaimlerChrysler isin better standing in comparison with the industry. Dividends payout ratio proves that thecompany pays more dividends than average, but I think it is not what investorsexpected and this lead to a drop in price of the stock.
Financial strength of the company interms of LT Debt to Equity and Total Debt to Equity ratios is almost twicestronger than the average in the industry. Lowreturn on Equity ratio might be explained by the fact that the company keeps alot of cash for the purpose of new investment. In general, the company shows strong figures and this view is supportedby Standards & Poor’s specialists’ statement. “DaimlerChrysler has a strong balance sheet,with significant cash reserves available for the next industry downturn, aswell as for strategic investments and alliances.”<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[iii]
One of the problems that can arise for the economies of theUS and Germany is downsizing of some of the departments. For example, one company does not need tworaw material purchase departments. Inthis case, the new company will need both of its departments because ofdifferent languages. The new companywill provide more job opportunities for both countries. There are two reasons why this might be so:
1)Expansion plans will require more people to be hired for the new company
2)Because of different languages, much of the documentation has to be translatedback and forth.
This figure shows expansion so far:
<img src="/cache/referats/3652/image008.gif" v:shapes="_x0000_s1026">
Since both companies are introduced to new markets and newopportunities, they will have toincrease their production capacities in order to meet demand in the newmarket. This factor will require morelabor ( as can be seen from the abovegraph), so more people will be hired. Government does its best to supportcompanies that can provide more employment opportunities for the population,because this contributes to the solution to the unemployment problem.Simultaneously, with the increase of labor involved in the production process,there will be an increase in gross domestic product.Environmental Issues in the New Corporation
Protection of the surroundingenvironment and conserving the natural foundations of life should be one of themain concerns of every company and every human being on the Earth. Due to lack of attention to these issues thecurrent environment conditions of the earth have changed dramatically for theworse.
DaimlerChrysler is one of the worldcorporations that pays a great deal of attention to environmental issues. Its management clearly understands theimportance of these issues in the long run. The following facts speak up for themselves:
“DaimlerChrysler and the European Nature Heritage Fund (Euronatur)presented an upbeat review of ten years of environmental cooperation at a pressconference in Berlin today. «The concerted efforts of DaimlerChrysler andEuronatur have decisively moved forward environmental protection and habitatsecurity in important large natural landscapes,» a joint statement said.<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[iv]
“On March 29, 2000, DaimlerChrysler’s manufacturing facilityin Toluca, Mexico, introduced to production a new wastewater recyclingfacility. The recycling facility willconserve precious water resources and reduce the potential for pollution by totallyrecycling all of the water used in the plant.”
In 1998, DaimlerChrysler spent $1.3billion on environmental protection, according to the company’s AnnualEnvironmental Report. Most of thisamount (about $813 million) was spent on research and development activities ongreen products and manufacturing processes.<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[v]Conclusion
There is only onething can be said about the future of the new company—it is unclear. As one can see throughout the research,firstly after the merger investors strongly believed in the future ofDaimlerChrysler, and as a result of that the stock price soared high. Recently the stock price has droppedsignificantly, but some believe that it is because entire market experiencesslumps. As seen on the prior chart ofthe stock performance, DaimlerChrysler’s stock price lost 1/3 of itsvalue. Another reason why the stockprice slumps is that estimated earnings did not match actual ones. As a December 1999, difference in estimatedand actual earning was ($0.64).<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[vi]
<img src="/cache/referats/3652/image010.gif" v:shapes="_x0000_s1030">
One of the positiveaspects of the merger is intensified competition in the auto-productionindustry. The new company is far frommonopolist size in this very giant market. General Motors and Ford Corporation are still main competitors ofDaimlerChrysler.Bibliography
<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[i]London CNN, http://CNNfn.com/, Monday, 27March, 2000
<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[ii]Standard & Poors, Stock Report, March 4, 2000
<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[iii]Standard & Poors, Stock Report, March 4, 2000
<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[iv]www.daimlerchrysler.com
<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[v]www.daimlerchrysler.com
<span Times New Roman",«serif»;mso-fareast-font-family:«Times New Roman»; mso-ansi-language:EN-US;mso-fareast-language:RU;mso-bidi-language:AR-SA">[vi]Yahoo Finance, Market Guide—Multex Earnings Estimates for DaimlerChrysler AG
1.<span Times New Roman"">World Motor Vehicle Data, AmericanAutomobile Manufacturers Association, 1998
2.<span Times New Roman"">www.yahoofinance.com, MarketGuide—Comparisons for DaimlerChrysler AG
3.<span Times New Roman"">“The Causes and consequences ofantitrust”; the public-choice perspective; Fred S.McChesney, William F.ShughartII; University of Chicago Press, 1995.
4.<span Times New Roman"">“The corporate merger”; William W. Alberts & Joel E. Segall; University of Chicago Press, 1966