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Abstract

The dramatic failure of the Daimler-Chrysler merger has become a serious test to the automobile market. However, it was a serious failure for Chrysler LLC. This paper reconsiders the main causes of the business failure that occurred to Chrysler LLC. The attribution theory of organizational behavior is used to explain the company’s failure. Leadership, organizational, and management structures that contributed to the failure are described and analyzed.

Keywords: Chrysler LLC, Daimler, merger, failure, leadership

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 Managerial Organizational Assignment

The failure of the Chrysler-Daimler merger became a serious test to the entire automobile industry. Since the times of Chairman K.T. Keller and until its tragic failure at the beginning of the 21st century, Chrysler LLC exemplified one of the most rapidly changing companies in the international automobile market. Leaders came and went, and Chrysler continued its fight for business and market success. The reasons of its failure were a complex combination of leadership, organizational, and managerial factors. The attribution theory of organizational behavior helps to explain why Chrysler LLC failed to achieve its strategic and operational goals. Chrysler’s failure is an example of poor management, ineffective organizational decentralization, and misbalanced leadership, which did not allow the company to improve its position in the Daimler-Chrysler merger.

The failure of Chrysler LLC remains one of the most notorious events in the history of the automotive industry. For decades, Chrysler LLC had been America’s permanent organizational and financial problem (Wallace, 2009). Since the beginning of the 1940s and up to the beginning of the 21st century, Chrysler LLC went through a series of major transformations, but even those changes could not secure the company from the eventual collapse. Reasons why Chrysler LLC failed to withstand the competitive and organizational pressures can be traced back to the middle of the 1950s. At that time, under the influence of the country’s missile program, Chrysler experienced the lack of effective organizational support and had to rely on external consultants (Wallace, 2009). This is when the first organizational problem emerged: Chrysler was transformed, following the decentralization patterns used by General Motors (GM). Each division had to have its own executive, who had full freedom of decision making and full authority over their division (Wallace, 2009). Unlike GM, executives working at Chrysler LLC felt that decentralization was alien to them (Wallace, 2009).

Another organizational factor of Chrysler’s failure was its notorious merger with Daimler in 1998. In the atmosphere of the rapid organizational advancement, increased profitability, and excellent business prospects, Chrysler LLC surrendered itself to one of the major global automobile giants. Before Daimler, Chrysler executives and managers had already learned to work as one cohesive team (Wallace, 2009). After the merger with Daimler, the most experienced and respected leaders departed, and the team immediately fell apart (Wallace, 2009). Leadership was the major reason why Chrysler LLC had failed. Although organizational shifts greatly contributed to the company’s tragic end, it is because of poor leadership that Chrysler failed to develop a better corporate image and overcome its market and operational obstacles.

Throughout its history, several important executives left Chrysler LLC, and the company could not stand up and keep moving. However, it was not before the Daimler-Chrysler merger that the discussed leadership problems became visible and urgent. “The stewardship of Chrysler during its 10-year mismatch with Daimler could not have been worse: Daimler’s executives and the policies they embraced wiped out 20 years of goodwill that Chrysler and its dealers had created with the public” (Wallace, 2009). Leaders who used to inspire their followers for years had to leave the company. Even when the owners had a unique chance to hire widely worshipped Wolfgang Bernhard as their CEO, they did not do it (Wallace, 2009). Considering the managerial side, without effective leaders and under the influence of Daimler’s organizational culture, the quality and efficiency of Chrysler’s management left considerable room for improvements. The merger turned into a clash of organizational cultures, which pressured Chrysler and left no space for its independent growth.

Given that leadership (more specifically, poor leadership) was the core factor of Chrysler’s failure, the attribution theory of organizational behavior can explain why the company has never achieved its goals. The attribution theory is primarily concerned with explaining the actions of other individuals, employees and followers (Miner, 2005). In organizational behavior, these attribution processes are not motivational but perceptional by nature (Miner, 2005). The attribution theory explains how the views of individuals affect their actions when they enter interpersonal relationships, as it is through these views that individuals filter information and choose the one which fits their perceptions, expectations, and goals (Miner, 2005). The attribution theory is directly related to Chrysler’s failure: leadership had been a regular cure used by the company to deal with its organizational and management problems. As a result, everything Chrysler managed or did not manage to achieve was mainly due to the way its leaders perceived their position and the company’s business situation.

The attribution theory could have predicted Chrysler’s failure in its merger with Daimler. The perceptions of both the German and American parties in the merger profoundly influenced the way they worked towards a common goal (Tosi & Pilati, 2011). When Daimler managers started to influence Chrysler executives, they simply acted to reinforce their dominant position (Tosi & Pilati, 2011). From the very beginning, Germans had a perception of superiority over Chrysler, and they guided all reorganization efforts within the American company. As a result, the most prominent Chrysler executives were bound to leave, while those who stayed with the company developed feelings of insecurity and loathing against Daimler’s executive personnel (Tosi & Pilati, 2011). Before the merger, both companies had perceived their future union as promising and mutually advantageous. After the merger, differences in attitudes and perceptions became the major barrier to achieve the common goals.  Chrysler’s failure once again confirmed the significance of attitudes and perceptions in organizational behavior and became an example of mismanagement, poor leadership and ineffective organizational restructuring that resulted in the company’s failure.

Conclusion

The failure of the Daimler-Chrysler merger was a serious test to the automobile industry and Chrysler LLC. A multitude of leadership, organizational, and management factors contributed to the failure. Poor leadership, ineffective decentralization, and mismanagement made profitability and success virtually unachievable for Chrysler. Based on the attribution theory of leadership, differences in executive perceptions and stereotypes became the principal barrier to effective cooperation and profitability. Chrysler’s failure confirmed the significance of attitudes and perceptions in organizational behavior and became an example of mismanagement, poor leadership and ineffective organizational restructuring that resulted in the company’s failure.

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