Fiat-Chrysler Merger: Leadership, Culture, and Teambuilding

Introduction: Skepticism and Promise of the Fiat-Chrysler Merger

The Chrysler merger with Fiat was met with skepticism and doubt when it was first proposed. Chrysler had just recently emerged from near bankruptcy — saved by a U.S. government bailout — while Fiat was a strong, internationally respected corporation building cars, earth-moving machines, and more. The merging of Chrysler and Fiat was seen as having a greater opportunity for success than the earlier merger between Chrysler and Daimler-Benz, yet doubters remained in the industry. However, as of May 2012, the blending of the two companies had produced a profitable situation. This paper examines the cultures and leadership styles within both companies — a strong combination that has allowed success to be achieved. It also critiques leadership dynamics within the merger and explores the concept of teambuilding when two companies join into one.

Corporate Culture and the Lessons of DaimlerChrysler

An article in The New York Times (Sorkin, 2009) notes that mergers between automobile companies "have a poor track record and seldom yield lasting results." Sorkin asserted that there is a "long list of deals" that have "soured because of the cultural differences" between merged companies. Moreover, auto firms that merge have typically not been able to "meld product lines and deliver on promises to cut costs" (Sorkin, p. 1).

The reason the Chrysler-DaimlerBenz marriage ended so poorly was that the leaders of the deal on the German side — first Jürgen E. Schrempp and then Dieter Zetsche — "refused to tear down the walls" separating the two companies (Sorkin, p. 1). Daimler-Benz tried to operate Chrysler as a "stand-alone division." One Fiat executive (who preferred to remain anonymous) told Sorkin that merging Daimler and Chrysler was like "Neiman Marcus merging with Home Depot" — and that it was destined to fail. The cultural basis for the failed merger, according to Italian union leader Giorgio Airaudo, was that the management style in Germany is "more rigid, hierarchical" than the way Italians manage companies (Sorkin, p. 2). Indeed, DaimlerChrysler was "crippled with endless committees" during which arguments erupted over "why things wouldn't work," according to Ferdinand Dudenhoffer, an auto research executive in Germany (Sorkin, p. 2).

When it became clear that the Daimler experiment had failed, Daimler dumped Chrysler into the lap of what journalist Jeremy Cato refers to as "the vulture capitalists from Cerberus Capital," a group that was "expert at careless and wicked cost-cutting, trying in their minds to put lipstick on what they thought was a pig, so it would fetch a profitable price" (Cato, 2012, p. 2). After the German owners had failed to share "their toys and their games" with what they viewed as "their wards in Auburn Hills," Daimler "sold out to Cerberus" and everyone "with eyes" could see that Chrysler had been "starved for investment and know-how" (Cato, p. 2).

Shortly after the Chrysler-Fiat merger process was launched in June 2009, an article in The Detroit News focused on the cultural issues surrounding it. "The culture clash was too great" between Daimler and Chrysler workers, Alisa Priddle writes after interviewing Chrysler workers in November 2009. One employee told Priddle, "There was a lot of fear and loathing under DaimlerChrysler, but this feels like a good partnership" (Priddle, 2009, p. 1). "We're all in this together," another worker said; "things are moving fast and it's contagious" (p. 2).

A New Partnership: Culture and Inclusion at Fiat-Chrysler

The Daimler executives were "deathly afraid of diluting the Mercedes brand," said Joe Phillippi, an analyst with Auto Trends Consulting (Priddle, p. 2). Daimler apparently never understood that Chrysler had something going for it as well. In fact, Daimler set rules to "preserve Mercedes' sanctity" (Priddle, p. 2). Professor Gerald Meyers, who once chaired American Motors and is a retired Chrysler executive, said that the Daimler people "felt superior and that came through at decision-making time" (Priddle, p. 2). Meyers recalled Chrysler employees and executives "being put in a straitjacket" and deeply resenting it.

The Chrysler-Fiat arrangement proved to be the reverse of what the Chrysler-Daimler marriage had been. According to one employee, "It's a partnership of inclusion… the Fiat people are saying, here are our platforms and technologies — what do you want?" (Priddle, p. 2). Another notable difference in the new merger is that there are far fewer Fiat executives stationed at Chrysler than there had been under the Daimler arrangement. With so few Fiat executives in Auburn Hills, Michigan, "a culture clash is almost a non-issue," commented Gualberto Ranieri, the communications executive with the newly merged company (Priddle, p. 2).

While engineers and designers do travel back and forth between Italy and Detroit, strict travel restrictions were put in place "to keep costs down" (Priddle, p. 2). That is a far cry from the Daimler era, when, according to former Chrysler communications director Mike Aberlich, the company "jet-shuttled employees round trip between Pontiac and Stuttgart three times a week" (Priddle, p. 2).

Conclusion: Leadership and the Road Ahead

There are many hurdles to overcome for executives and employees when two companies merge. The literature shows that in the case of Chrysler and Fiat, because of the strong leadership shown by Sergio Marchionne, this merger got off to a very impressive start. By integrating cooperative teams from both Fiat and Chrysler, and by hiring the most competent professionals for pivotal roles, Marchionne put his personal and professional reputation on the line — and in doing so, opened the door for revolutionary change. By lifting Chrysler out of the black hole of bankruptcy and bringing the best of both automotive worlds together — producing a Dodge Dart that achieves 40 miles per gallon — Marchionne crafted a remarkable leadership success story, one that offers important lessons for any organization navigating the complex terrain of a cross-cultural merger.