Read the Case Study below and answer the questions that follow:

Daimler$-$Chrysler Merger: A Cultural Mismatch?

Introduction

In May $1998,$ Daimler$-$Benz and Chrysler Corporation, two $(2)$ of the world's leading car manufacturers, agreed to combine

their businesses in what they claimed to be a "merger of equals." The DaimlerChrysler $($DCX$)$ merger took approximately

one year to finalize. The process began when Jurgen Schrempp and Robert Eaton met to discuss the possible merger on

January $18,1998.$ After receiving approval from a number of groups, the merger was completed on November $12,1998.$

The merger resulted in a large automobile company, ranked third in the world in terms of revenues, market capitalization

and earnings, and fifth in the number of units $($passenger$-$cars and commercial vehicles combined$)$ sold. DCX generated

revenues of $$155\mathrm{.}3$ billion and sold $4$ million cars and trucks in $1998.$ Schrempp and Eaton jointly led the merged entity,

as co$-$chairmen and co$-$CEOs. DCX sources were confident that the new company was well poised to exploit the growth

opportunities offered by the global automotive market in terms of geographical and product segment coverage. However,

analysts felt that to make the merger a success, several important issues needed to be addressed. The most significant

of these was organizational culture. German and American styles of management differed sharply. A cultural clash would

be a major hurdle to the realization of the synergies identified before the merger. To minimize this clash of cultures,

Schrempp decided to allow both groups to maintain their existing cultures. The former Chrysler group was given

autonomy to manufacture mass$-$market cars and trucks, while the Germans continued to build luxury Mercedes.

However, analysts felt that this strategy wouldn't last long. When Chrysler performed badly in $2000,7$ its American

president, James P Holden, was replaced with Dieter Zetsche from Germany. Analysts felt that Zetsche would impose

Daimler's culture on its American counterpart. A few senior Chrysler executives had already left and more German

executives were joining Chrysler at senior positions. Clash of Cultures.DCX$\text{'}$s success depended on integrating two

starkly different corporate cultures. $"$If they can't create a climate of learning from each other," warned Ulrich Steger, a

management professor at IMD, the Lausanne business school, "they could be heading for an unbelievable catastrophe."

Daimler$-$Benz was characterized by methodical decision$-$making while Chrysler encouraged creativity. Chrysler was the

very symbol of American adaptability and resilience. Chrysler valued efficiency, empowerment, and fairly egalitarian

relations among staff$$ whereas Daimler$-$Benz seemed to value respect for authority, bureaucratic precision, and

centralized decision$-$making. These cultural differences soon became manifest in the daily activities of the company. For

example, Chrysler executives quickly became frustrated with the attention Daimler$-$Benz executives gave to trivial

matters, such as the shape of a pamphlet sent to employees. Daimler$-$Benz executives were equally perplexed when

Eaton showed his emotions with tears in a speech to other executives. Chrysler was one of the leanest and nimblest car

companies in the world$$ while Daimler$-$Benz had long represented the epitome of German industrial might $($its Mercedes

cars were arguably the best example of German quality and engineering$).$ Another key issue at DCX was the differences

in pay structures between the two pre$-$merger entities. Germans disliked huge pay disparities and were unlikely to accept

any steep revision of top management salaries. But American CEOs were rewarded handsomely: Eaton earned a total

compensation of $$10\mathrm{.}9$ million in $1997.$ Complications would arise if an American manager posted at Stuttgart$8$ ended up

reporting to a German manager who was earning half his salary. Chrysler could cut pay only at the risk of losing its

talented managers. Schrempp mooted the idea of overcoming the problem through a low basic salary and high

performance$-$based bonus, unlike anything seen in Europe. Base pay would be lower than what Germans were used to$,$

but the pay structure would have more variables such as stock options $($an American feature$).$Germans and Americans

also had different working styles. The Germans were used to lengthy reports and extended discussions. On the other

hand, the Americans performed little paperwork and liked to keep their meetings short. Americans favored fast$-$paced

trial$-$and$-$error experimentation, whereas Germans drew up painstakingly detailed plans and implemented them precisely.

In general, the Germans perceived the Americans as "chaotic" while the Americans felt that the Germans were stubborn

"militarists." Chrysler managers believed in spotting opportunities and going for them. However, post merger, they were

trapped in the German style of planning, constantly being told what to