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History Thesis: Corporate Transparency

The completion of my history thesis meant that I am half way through my senior projects. From March 4th to April 3rd, I worked on the writing of my history thesis. The title is "The Paradox of 'Merger of Equals': A Tumbling Start of DaimlerChryser, 1998-2000." Although the writing started in March, I started to conduct research and brainstorm about the thesis since last September, as the history thesis is a one-year course.

The story is about the merger between Germany's industrial giant Daimler-Benz and America's auto star Chrysler in 1998. The merger was situated in the context of globalization and the emerging overcapacity in automotive industry. Many scholars have studied the failure of this merger from a cultural perspective, and it is largely thought that the conflicts between the German and American culture led to the failure of the merger. Nevertheless, my approach tried to understand the cause of the failure beyond the cultural perspective.

In the beginning, the marriage between Daimler-Benz and Chrysler was categorized as a "merger of equals," a relationship where two companies will be "equal" in the merged company rather than one becoming the subsidiary of the other. However, my research showed that the merger was never a truly "merger of equals" even in the beginning. The unbalanced corporate management structure and the signals from Chrysler's weak leadership actions both provided evidences suggesting a German takeover of Chrysler. Nevertheless, the merger was cast under a facade of "merger of equals" and portrayed as to create a "new and hybrid" company rather than a German-controlled company. To put such a cover on the true nature of the merged company created a discrepancy between what Chrysler's employees expected the company to be and what they actually experienced. The demotion of some of Chrysler's top executives led to their departures and the perception of takeover also drove away some of the most loyal members of Chrysler's "1990s dream team." The story had its "showdown" in 2000 when Chrysler started to tumble due to the harsher market as well as its brain drain. The firing of Chrysler's President and the insertion of two German executives to take over Chrysler was the last gesture by Daimler-Benz in the gradual process of getting control over Chrysler.

What is an important takeaway from this failure of merger is the importance of corporate transparency in a cross-border M&A, especially in the one that's considered the largest industrial merger at the time. The ambiguity over the true nature of the new company sent confusing messages to Chrysler's employees and created false expectations which started to hurt them when their experience conflicted with their expectations. Such a study is used by the paper to highlight the importance of corporate transparency and honesty in the business world. The current M&A is much global in scale than the one in the late 20th century and it involves more emerging markets rather than developed markets in OECD countries. Therefore, with less sophisticated players in the game, corporate transparency will more likely to be ignored in pursuit of temporary financial benefits.

The project emerged from my interest in business history and my curiosity about the behind-scene stories of big corporations. As a concluding piece of my history study at Yale, I hope it will be a step stone to help me further understand business not only from a technical perspective, but also from a humanity perspective and document the humanity manifested in the business world that has often been defined by its "cold-blooded" pursuit of financial interests.

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