Daimler-merc demerger.docxDaimler AG (German pronunciation: [ˈdaɪmlɐ aːˈɡeː];

formerly DaimlerChrysler; FWB: DAI) is a German car corporation. It is the thirteenth-largest car

manufacturer and second-largest truck manufacturer in the world. In addition to automobiles, Daimler

manufactures buses and provides financial services through its Daimler Financial Services arm. The

company also owns major stakes in aerospace group EADS, high-technology and parent company of

theVodafone McLaren Mercedes racing team McLaren Group (which currently is in the process of

becoming a fully independent stand-alone corporate entity[2]), and Japanese truck maker Mitsubishi Fuso

Truck and Bus Corporation.

DaimlerChrysler was founded in 1998 when Mercedes-Benz manufacturer Daimler-Benz (1926–1998)

of Stuttgart, Germany merged with the US-basedChrysler Corporation. The deal created a new entity,

DaimlerChrysler. However, the buyout failed to produce the trans-Atlantic automotive powerhouse

dealmakers had hoped for, and DaimlerChrysler announced on May 14, 2007 that it would sell Chrysler

to Cerberus Capital Management of New York, aprivate equity firm that specializes in restructuring

troubled companies.[3] On October 4, 2007 a DaimlerChrysler Extraordinary Shareholders' Meeting

approved the renaming of the company. From October 5, 2007, the company has been titled Daimler AG.

[4] The US company adopted the name Chrysler LLC when the sale completed on August 3, 2007.

Daimler produces cars and trucks under the brands of Mercedes-Benz, Maybach, Smart, Freightliner and

many others.

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[edit]History

Daimler AG is a German manufacturer of automobiles, motor vehicles, and engines, which dates back

more than a century.

An Agreement of Mutual Interest was signed on May 1, 1924 between Benz &Cie (founded 1883) of Karl

Benz and Daimler MotorenGesellschaft (founded 1890) of Gottlieb Daimler and Wilhelm Maybach.

Both companies continued to manufacture their separate automobile and internal combustion engine

brands until, on June 28, 1926, when Benz & Cie. and Daimler MotorenGesellschaft AG formally merged

—becoming Daimler-Benz AG—and agreed that thereafter, all of the factories would use the brand name

of Mercedes-Benz on their automobiles.

In 1998 Daimler-Benz AG "merged" with the American automobile manufacturer Chrysler Corporation,

and formed DaimlerChrysler AG. In 2007, when the Chrysler group was sold off to Cerberus Capital

Management, the name of the parent company was changed to simply Daimler AG.

[edit]Timeline of Daimler AG

Benz & Company, 1883–1926

Daimler MotorenGesellschaft AG, 1890–1926

Daimler-Benz AG, 1926–1998

DaimlerChrysler AG, 1998–2007

Daimler AG, 2007–present

[edit]Former Chrysler operations

Former logo of Daimler AG as Daimler Chrysler AG.

Chrysler has suffered a series of setbacks in recent years, culminating in DaimlerChrysler's agreement to

sell the unit to Cerberus Capital Management in May 2007 for US$6 billion. Through most of its history,

Chrysler has been the third largest of the "Big 3" US auto makers, but in January 2007, DaimlerChrysler,

excluding its luxury Mercedes and Maybach lines, also outsold traditionally second place Ford, though

behind General Motors and Toyota.

Chrysler reported losses of US$1.5 billion in 2006. It then announced plans to lay off 13,000 employees in

mid-February 2007, close a major assembly plant and reduce production at other plants in order to

restore profitability by 2008.[5]

The merger was contentious with investors launching lawsuits over whether the transaction was the

'merger of equals' that senior management claimed or actually amounted to a Daimler-Benz takeover of

Chrysler. A class action investor lawsuit was settled in August 2003 for US$300 million while a suit by

billionaire investor activist Kirk Kerkorian was dismissed on April 7, 2005.[6] The transaction claimed the

job of its architect, Chairman Jürgen E. Schrempp, who resigned at the end of 2005 in response to the fall

of the company's share price following the transaction. The merger was also the subject of a book Taken

for a Ride: How Daimler-Benz Drove Off With Chrysler, (2000) by Bill Vlasic and Bradley A. Stertz.[7]

Another issue of contention is whether the merger delivered promised synergies and successfully

integrated the two businesses. As late as 2002, DaimlerChrysler appeared to run two independent

product lines. Later that year, the company launched products that appear to integrate elements from

both sides of the company, including the Chrysler Crossfire, which was based on the Mercedes SLK

platform and utilized Mercedes's 3.2L V6, and the Dodge Sprinter/Freightliner Sprinter, a re-

badged Mercedes-Benz Sprinter van. The fourth-generation Jeep Grand Cherokee is based on

theMercedes-Benz M-Class despite the fact it had been nearly four years after the Daimler/Chrysler split.

[8]

[edit]Sale of Chrysler

DaimlerChrysler had reportedly approached other carmakers and investment groups to sell Chrysler in

early 2007. General Motors was reported to be a suitor while Volkswagen, the Renault-Nissanauto

alliance, and Hyundai Motor Company had said that they weren't interested in buying the company.

On August 3, 2007, DaimlerChrysler completed the sale of Chrysler Group to Cerberus Capital

Management. The original agreement stated that Cerberus would take an 80.1 percent stake in the new

company, Chrysler Holding LLC. DaimlerChrysler changed its name to Daimler AG and retained the

remaining 19.9% stake in the separated Chrysler.[9]

The terms saw Daimler pay Cerberus US$650 million to take Chrysler and associated liabilities off its

hands. This is a remarkable reverse in fortunes on the US$36 billion paid to acquire Chrysler in 1998. Of

the US$7.4 billion purchase price, Cerberus Capital Management will invest US$5 billion in Chrysler

Holdings and US$1.05 billion in Chrysler’s financial unit. The de-merged Daimler AG received US$1.35

billion directly from Cerberus but directly invested US$2 billion in Chrysler itself.

Since Chrysler's 2009 bankruptcy filing in the United States, Chrysler has been controlled

by Italian automaker Fiat, which unlike Daimler plans to integrate Chrysler's products into the Fiat

portfolio, most notably Lancia and Chrysler's namesake brand.

[edit]Renault-Nissan and Daimler Alliance

On April 7, 2010 Renault-Nissan executive, Carlos Ghosn and Dr. Dieter Zetsche announced a

partnership between the three companies in a joint press conference.[10]

[edit]Management

Dr. Dieter Zetsche has been the Chairman of Daimler and Head of Mercedes-Benz Cars since January 1,

2006 as well as member of Board of Management since 1998. He was former President and CEO of

the Chrysler, LLC (previously owned by Daimler AG), he may be best known in the United States as Dr. Z

from a Chrysler advertising campaign called "Ask Dr. Z".

Current members of the Board of Management of Daimler AG are:

Dr. Dieter Zetsche: Chairman of the Board as well as Head of Mercedes-Benz Cars.

Dr. Wolfgang Bernhard: Head of Mercedes-Benz Cars Procurement and Production.

WilfriedPorth: Head of Human Resources and Labor Relations.

Andreas Renschler: Head of Daimler Trucks.

BodoUebber: Head of Finance and Controlling as well as Financial Services.

Dr. Thomas Weber: Head of Group Research and Mercedes-Benz Cars Development.

Current members of the Supervisory Board of Daimler AG are: Heinrich Flegel, Juergen

Hambrecht, Thomas Klebe, Erich Klemm, Arnaud Lagardère, Jürgen Langer, Helmut Lense, Sari

Baldauf, William Owens, AnsgarOsseforth, ValterSanches, Manfred Schneider, Stefan

Schwaab, Bernhard Walter, Lynton Wilson, Mark Wössner, Manfred Bischoff, Clemens Börsig and Uwe

Werner. Dr Manfred Bischoff serves as the Chairman of the Supervisory Board of Daimler AG and Erich

Klemm as Vice-Chairman.[11]

[edit]Shareholders Structure

by Ownership [12]

Aabar Investments  (United Arab Emirates): 9.1%

Kuwait Investment Authority  (Kuwait): 6.9%

Renault  (France): 1.55%

Nissan  (Japan): 1.55%

Institutional investors : 60.4%

Private Investors : 20.4%

Treasury Shares : 0.1%

by Region [12]

30.0% Germany

33.5% Other Europe

17.9% United States

9.1% United Arab Emirates

6.9% Kuwait

2.6% Others

[edit]Brands

Daimler sells automobiles under the following marques worldwide:

Mercedes-Benz Cars

Maybach

Mercedes-Benz

Smart

Mercedes-AMG

Daimler Trucks

Commercial vehicles

Freightliner

Mercedes-Benz (truck group)

Mitsubishi Fuso

Thomas Built Buses

Sterling Trucks  - operations wind down in 2010, but will continue to support authorized

dealers and vehicle owners

Western Star

Components

Detroit Diesel

Mercedes-Benz

Mitsubishi Fuso

Daimler Buses

Mercedes-Benz buses

Orion Bus Industries

Setra

Mercedes-Benz Vans

Mercedes-Benz (vans group)

Daimler Financial Services

Mercedes-Benz Bank

Mercedes-Benz Financial

Daimler Truck Financial

[edit]Holdings

Daimler currently holds interests in the following companies:

85.0% Mitsubishi Fuso Truck and Bus Corporation of Japan

50.1% Automotive Fuel Cell Cooperation of Canada

11% McLaren Group of United Kingdom (McLaren Group acquiring back stake gradually, to be

completed early 2011)

22.4% European Aeronautic Defence and Space Company (EADS) - a parent company of Airbus of

Europe

22.3% Tognum of Germany

10.0% KAMAZ of Russia

10.0% Tesla Motors of United States

[edit]Partners

Daimler has built 1,000 all-electric versions of its small Smartcar using Tesla's battery technology.

[13] Daimler works with China's BeiqiFoton (a subsidiary of BAIC) to build Auman trucks,[14] and with BYD

to develop EV technology.[15]

[edit]Bribery and corruption

Main article: Oil-for-Food Programme#Daimler AG Kickbacks Case

On April 1, 2010, Daimler AG's German and Russian subsidiaries each plead guilty to two counts

of bribery charges brought by the U.S. Justice Department and the U.S. Securities and Exchange

Commission. Daimler itself will pay US$185 million as a settlement, but the company and its

Chinese subsidiary remain subject to a two-year deferred prosecution agreement which requires further

cooperation with regulators, adherence to internal controls and meeting other terms before they are

required to return to the court room. Daimler will face harsher penalties if the company fails to meet the

terms of the agreement during the two-year period.

Additionally, Louis J. Freeh, a former director of the Federal Bureau of Investigation, will serve as an

independent monitor to oversee Daimler’s compliance with anti-bribery laws.

U.S. prosecutors accused key executives of Daimler, Daimler subsidiaries, and Daimler affiliates of

illegally giving foreign officials money and gifts between 1998 and 2008 to secure government contracts

around the world. The investigation for the case revealed that Daimler improperly paid some $56 million in

bribes related to more than 200 transactions in at least 22 countries (including China, Russia, Turkey,

Hungary, Greece, Latvia, Serbia and Montenegro, Egypt and Nigeria, among other places) that, in return,

awarded the company $1.9 billion in revenue and at least $91.4 million in illegal profits.[16]

The SEC case was sparked in 2004 after David Bazzetta, a former auditor at then DaimlerChrysler Corp,

filed a whistleblower complaint after he was fired for raising questions about bank accounts controlled by

Mercedes-Benz units in South America.[17] Bazzetta alleged that he learned in a July 2001 corporate audit

executive committee meeting in Stuttgart that business units "continued to maintain secret bank accounts

to bribe foreign government officials," though the company knew the practice violated U.S. laws.

In another attempt to silence Bazzetta, Daimler later offered to settle his termination of employment suit

out of court and he eventually accepted a settlement. But Daimler's strategy with Bazzetta proved to be a

failure as the U.S. criminal investigation for violating anti-bribery laws was already underway in what is

one of the most wide-ranging cases brought against a foreign corporation.

According to the charges, the bribes were frequently made by over-invoicing customers and paying the

excess back to top government officials or their proxies. The bribes also took the form of luxury European

vacations, armored Mercedes vehicles for high-ranking government officials and a birthday gift to a

senior Turkmenistan official including a golden box and 10,000 copies of the official's

personal manifesto translated into German.

Investigators also found that the firm violated the terms of the United Nations' Oil-for-Food

Programme with Iraq by giving kickbacks worth 10% of the contract values to officials within the Iraqi

government, then led by Saddam Hussein. The SEC said the company made more than $4 million from

the sale of vehicles and spare parts in the corrupt Oil-for-Food deals.[16]

U.S. prosecutors further alleged that some bribes were paid through shell companies based in the U.S.

"In some cases Daimler wired these improper payments to U.S. bank accounts or to the foreign bank

accounts of U.S. shell companies in order to transmit the bribe," the court papers said.[18]

Prosecutors said that Daimler engaged in a "long-standing practice" of paying bribes, due in part to a

corporate culture that encouraged the practice.

"Using offshore bank accounts, third-party agents and deceptive pricing practices, these companies

[Daimler AG, its subsidiaries and affiliates] saw foreign bribery as a way of doing business," said Mythili

Raman, a principal deputy in the Justice Department’s criminal division.[19]

"It is no exaggeration to describe corruption and bribe-paying at Daimler as a standard business practice,"

Robert Khuzami, director of the SEC's enforcement division, said in a statement.[20]

"We have learned a lot from past experience," Dieter Zetsche, chairman of Daimler's board, said in a

statement.

As per the agreement with prosecutors, the two Daimler subsidiaries admitted to knowingly violating

the Foreign Corrupt Practices Act, which bars companies and their officials from paying bribes to foreign

officials to win business.[21] The Foreign Corrupt Practices Act applies to any company that lists its shares

on U.S. stock exchanges. Daimler AG was listed with the symbol "DAI" on theNYSE, giving the Justice

Department jurisdiction over the German car maker's payments in countries around the globe.

Judge Richard J. Leon of United States District Court in Washington, D.C., approved the plea agreement

and settlement, calling it a "just resolution."

The primary case is USA v. Daimler AG, United States District Court for the District of Columbia, No. 10-

00063.[22]

[edit]Alternative propulsion

[edit]Biofuel research

Daimler AG is involved in a joint project with Archer Daniels Midland Company and Bayer CropScience to

develop jatropha as a biofuel.[23]

[edit]Transport electrification

Carmaker Daimler AG and the utility company RWE AG are going to begin a joint electric car

and charging station test project in the German capital, Berlin, called "E-Mobility Berlin".[24][25]

Mercedes-Benz is launching its first passenger car model equipped with a hybrid drive system in summer

2009, the Mercedes-Benz S 400 HYBRID.[25]

Daimler Trucks is the world market leader in hybrid systems. With its “Shaping Future Transportation”

initiative, Daimler is pursuing a clear-cut objective for trucks and buses. The Mitsubishi Fuso “Aero Star

Eco Hybrid” is now setting new standards in practical trials in Japan.[26]

[edit]Formula 1

On November 16, 2009 Daimler purchased a 75.1% stake in Brawn GP. The company was rebranded

as Mercedes GP. Ross Brawn will remain team principal and the team will be based in Brackley, UK.

However the purchase of Brawn meant that Daimler will sell its 40% stake in McLaren back in phases

which will end in 2011. Mercedes will continue to provide sponsorship and engines to McLaren until 2015,

when McLaren will probably have to find an engine supplier or make its own engines. Mercedes owns

45.1% of the new company with 30% for Aabar Investments and 24.9% for Ross Brawn. The racing team

has signed the former champion Michael Schumacher.

History of DaimlerChrysler

    I     INTRODUCTION   DaimlerChrysler AG, one of the world’s largest manufacturers of cars and trucks, formed in 1998 when German industrial giant Daimler-Benz AG merged with American automobile manufacturer Chrysler Corporation. DaimlerChrysler manufactures the Mercedes-Benz line of German luxury automobiles as well as vehicles under the American brand names of Chrysler, Dodge, Plymouth, Eagle, and Jeep. Besides automobiles and trucks, DaimlerChrysler also manufactures aircraft and aircraft engines, satellites and space systems, guided missilesand weapons systems, trains, electronics, and home appliances. Production of automobiles, however, remains the company’s core business. DaimlerChrysler maintains headquarters in Stuttgart, Germany, the original home of Daimler-Benz, and in Auburn Hills, Michigan, the original headquarters of Chrysler.

    II     HISTORY OF DAIMLER-BENZ Daimler-Benz sprang from the simultaneous development of the internal-combustion engine in the 1880s by Karl Benz and Gottlieb Daimler, two engineers who founded separate companies (see Automobile Industry: The Internal-Combustion Engine). Benz and

Daimler never met, but their companies, Daimler Engine and Benz & Companies, became successful manufacturers of automobiles. In 1885 Benz built a three-wheeled vehicle with an internal combustion engine, the first practical gasoline-powered automobile. In 1900 Emil Jellinek, the consul general of Austria-Hungary, financed Daimler’s production of a new high-performance car on the condition that it be named after Jellinek’s daughter Mercedes. In 1906 Daimler hired as his chief engineer Ferdinand Porsche, who would produce many influential design innovations and who later conceived the Volkswagen (see Volkswagen AG). When Daimler merged with Benz in 1926, the Mercedes-Benz line of automobiles was born.

Consistently successful in early automobile racing, the company progressed rapidly until World War II (1939-1945), when the state took over the German auto industry. Daimler-Benz became part of the German war effort, producing trucks, tanks, and aircraft engines. Although the war destroyed 70 percent of its production capacity, the company successfully rebuilt in the 1950s and became the largest automaker outside the United States and the world’s premier producer of luxury cars.

Competition from Japanese car manufacturers prompted Daimler-Benz to expand and diversify in the 1980s. The company moved into industrial technology with the acquisition of AEG, a manufacturer of electrical products, and into aerospace by buying control of Dornier, a manufacturer of space systems and commuter planes. In 1992 the company gained control of Fokker, a Dutch airplane manufacturer. With the luxury-car market growing increasingly competitive, and the defense and industrial sectors dampened in part by the reunification of Germany, the diversification strategy resulted in losses of $1.3 billion in 1993. The company began restructuring, cutting costs, and eliminating jobs, particularly in the aerospace sector.

Still struggling in 1995, the company lost $3.9 billion. However, its automobile division, which accounted for two-thirds of the company’s business, regained profitability. In the early 1990s Mercedes opened car plants in the United States, India, and China in an effort to cut labor costs and open markets.

    III     HISTORY OF CHRYSLER In 1920 Walter P. Chrysler, then 45, resigned as an executive at General Motors Corporation because of differences with the company’s president, William C. Durant. After restoring automaker Willys-Overland to financial health in 1920, Chrysler joined the struggling Maxwell Motor Corporation. With the aid of three engineers, he designed the Chrysler Six automobile for Maxwell. Introduced in 1924, the low-priced car featured four-wheel hydraulic brakes and a high-compression, six-cylinder engine, previously unavailable in an affordable car. The car was a success, with 32,000 sold in its first year.

Maxwell Motor became Chrysler Corporation in 1925, with Chrysler as president. The company concentrated on product innovation, introducing models with a top speed of about 130 km/h (about 80 mph)—twice the top speed of Ford’s Model T. In 1928 Chrysler acquired Dodge Brothers Motor Car Co., an automaker founded by brothers John and Horace Dodge. The acquisition significantly increased Chrysler’s size and allowed it to spend $75 million to build its own manufacturing plants. That year the company also introduced the affordable Plymouth and the upscale DeSoto. In 1933 Chrysler surpassed Ford in sales for the first time. Walter Chrysler retired from the company in 1935 and died in 1940.

After the United States entered World War II in 1941, Chrysler produced tanks, army trucks, engines for B-29 bomber airplanes, antiaircraft guns, and other equipment for Allied forces. For almost a decade after the war, while other companies designed new cars and added features, Chrysler introduced few new models. By the early 1950s Chrysler had

slipped to third place among U.S. automakers. In the 1960s the National Aeronautics and Space Administration (NASA) chose Chrysler to produce Saturn 1 and Saturn 1B booster rockets, used in the first successful U.S. spaceflights.

Chrysler frequently misjudged consumer tastes and needs. In the 1950s it introduced boxy cars while GM and Ford launched sleek-looking models. In the early 1960s the company launched small cars just as consumers began to demand power and luxury. With oil prices high in the early 1970s, Chrysler maintained its line of large, inefficient cars. As a result, Chrysler’s share of the U.S. automobile market dropped from 21 percent in 1952 to just 9 percent in 1979. The company suffered severe financial losses throughout the 1970s.

In 1978 the company hired former Ford president Lee Iacocca as its president and chief executive officer. In 1980, as Chrysler faced bankruptcy, the federal government agreed to guarantee $1.5 billion in loans to keep the company afloat. The bailout was unpopular among many Americans, but Iacocca appeared on television and made speeches to explain Chrysler’s position. His efforts helped win support for the company, which paid back the loans in 1983, seven years early.

In the early 1980s Chrysler closed several plants and laid off thousands of workers. At the same time, it introduced a successful line of new vehicles, including Chrysler K-cars, the Dodge Aries, the Plymouth Reliant, and the LeBaron convertible. In 1984, the year it introduced the best-selling Dodge Caravan and Plymouth Voyager minivans, Chrysler earned record profits of $2.4 billion. In 1987 Chrysler acquired American Motors Company, maker of Eagle cars and four-wheel drive Jeeps. The company diversified by buying aerospace and rental-car businesses, but it sold these and other noncore businesses in the 1990s.

In 1991 the company lost $795 million due to poor sales during an economic recession. But from 1992 to 1995, the company increased its revenues based on the strong sales of its minivans and Jeep Grand Cherokee. In 1997 a month-long strike by 1,800 workers at a key engine plant in Detroit caused the company to lose $450 million. The strike was the longest at a Chrysler plant in 30 years.

    IV MERGER     In 1998 Daimler-Benz acquired Chrysler Corporation for $38 billion, representing one of the largest industrial mergers in history. Analysts of the automobile industry observed that the new company combined Daimler-Benz’s attention to quality with Chrysler’s low-cost manufacturing strategies. The merger also positioned DaimlerChrysler for expansions into Asian and Latin American markets, where analysts predict significant future growth in the automobile industry. At the same time, Daimler-Benz’s distribution network allowed the company to rapidly expand the Chrysler automobile lines to markets in Europe. Many economists considered the creation of DaimlerChrysler an indication of the advantages and challenges of a global economy. For example, the merger allowed the companies to cut costs by combining many of their research, production, and marketing efforts. However, the original German and American companies also faced significant differences in corporate tradition and national culture. Daimler-Benz, for example, was known for its highly complex and stratified management structure, whereas Chrysler had worked hard during the 1980s and 1990s to develop into a streamlined, profit-driven organization. Despite these differences, the merged company expected to reach a much wider range of customers with a fully diversified line of passenger cars, trucks, and utility vehicles.