DAIMLER-BENZ's acquisition of Chrysler Corp., while startling in size, does not herald a new era in global capitalism. Mergers between European and American companies have been taking place for some years. As corporations look to improve their earnings and streamline their operations, future cross-border mergers will involve large enterprises in every industry.
By any measure, the Daimler-Chrysler marriage is gigantic. The deal is worth $39 billion. It will create a company with 420,000 employees, annual sales of $130 billion and profits of $4.6 billion.
This is likely to be the first of similar combinations, particularly among automotive manufacturers. Worldwide production capacity of 70 million cars and trucks far exceeds last year's sales of 52 million. Strong producers such as Ford, General Motors, Toyota and Honda may consider this an opportune time to buy troubled companies such as Nissan or Fiat.
The challenge in these large mergers is combining two extremely different companies. In this case, the companies have different histories of union-management relations, for example, that must somehow be reconciled.
And then there are more basic questions: Where will the real power in the combined company be? Will the combined company use American or European accounting rules? Will it maintain Daimler-Benz and Chrysler's successful, distinct brands, such as the Mercedes sedan and the Jeep?
Executives running large corporations are more comfortable than ever about buying foreign companies. They have calculated that the benefits of owning firms in foreign lands far outweigh the risks.
We in Baltimore know this well. Allied Irish Banks owns First National Bank of Maryland's parent company. Aegon, a Dutch company, purchased Monumental Insurance Co. a decade ago, and Zurich Reinsurance owns Maryland Casualty.
Last year, international deals valued at $400 billion were executed. Given managers' quest to improve efficiencies and profits, the melding of U.S. and foreign companies soon could become a fact of corporate life.
Pub Date: 5/09/98