The Daimler Chrysler Commercial Vehicles Division

By Michael Hannan, Joel Podolny, John Roberts
1999 | Case No. IB27

On Monday November 16, 1998, the day before Daimler-Benz’ would officially merge with Chrysler, Dr. Kurt Lauk, head of Daimler-Benz’ commercial vehicles division (CVD) reflected on the organizational changes he had directed over the course of the previous two years to make CVD more competitive in an era of industry-wide globalization. Prior to Daimler-Benz, Lauk, a native of Stuttgart, Germany, had been a member of the board of management of VEBA AG where he held the position of chief financial officer and chief controller from 1992 to1996. To unite an extremely decentralized organizational structure at Daimler, Lauk initiated a worldwide reorganization and the integration of the company’s manufacturing operations. He encouraged individual units within CVD to look for collaborative opportunities that would enable the division to realize global scale economies. While Lauk promoted a global perspective within CVD, he believed that the business units could only compete effectively if they were allowed considerable autonomy to respond to their own unique market conditions. Even though Lauk was proud of the achievements resulting from these directives, pressing concerns overshadowed his satisfaction. Although the CVD was profitable overall, its Power Train Unit continued to lose money. In addition, Lauk was concerned about Daimler’s progress in building adequate distribution channels in the Asian region. Daimler was the market leader in commercial vehicles in all regions of the world but, despite manufacturing joint ventures with Chinese manufacturers, the company’s distribution channels were still underdeveloped in the Asian region. Finally, Lauk considered the impact of the merger with Chrysler on CVD and the general uncertainty concerning how a more centralized organization would affect the CVD—would CVD’s specific needs be recognized and met? How would decisions like the consolidation of IT operations throughout the company or the integration of materials purchasing for both passenger and commercial vehicles into one unit affect CVD?

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