Chapter One – Company, industry and competitors
One of the largest automobiles manufacturing company’s in Europe is Daimler-Chrysler. The report will present a case study of the organization, including past and present performance, and future expectations. In order to provide an effective assessment of this business, we shall also compare its performance with other organizations within the industry.
Section 1 – Business description
Daimler-Chrysler concentrates its business on a limited number of core areas, (Annual report 2005). These are automobiles, including SUV’s[1], sports and passenger cars, minivans and pick-ups, and according to the report it is the “world’s largest manufacturer of commercial vehicles.” It is also has an interest in aircraft and other service businesses, and is involved with the aerospace and defense industry, having a 33% stake in EADS[2].
Section 2 – Company History
Having been formed as a result of a $42 international merger between Daimler, the biggest German industrial company, and Chrysler, a top three automobile manufacturer in the US (Business 1998), Daimler-Chrysler as an entity has only been existence since 1998. The merger made it the fifth largest global automobile manufacturer.
Despite this relatively short period of existence, the organization has engaged upon a series of acquisitions and divestitures in the past eight years. Most of its acquisitions took place within the automotive industry, the two most significant of which were the purchase of significant stakes in the Japanese carmaker Mitsubishi (34%)(Andrews 2000), and the Korean company Hyundai (9%). In 2001, it increased its stake in Mitsubishi stake to 37%. In 2002 and 2004, it bought significant stakes in the Japanese companies Mitsubishi’s and Hyundai’s truck making businesses (CNN 2002), consolidating its position as the world’s largest truck maker. In the case of Mitsubishi, the truck section was separated into a new business in which DaimlerChrysler holds a majority interest.
However, the relationship with Hyundai was fraught with difficulties from the onset and the two organizations failed to integrate successfully. As a result of this, together with a dispute over the expansion of DaimlerChrysler’s interests in China, the investment in Hyundai was sold (Gail Edmondson 2004). This was followed in 2005 with the sale of its stake in the then ailing Japanese carmaker Mitsubishi. Months earlier the company had refused a request from the Japanese company for financial help. At the time, the company was experiencing its own problems with Mercedes struggling against its aggressive German competitor BMW and Chrysler still struggling to become profitable.
In the meantime, Daimler has continued its expansion into the Chinese market, announcing in September 2006 that it would be opening its first car-making factory in China as part of an investment in the region close to $2 billion (Joe McDonald 2006).
Outside of the direct car and truck industry, the company has also been active in other business areas. In 2000, it sold a controlling interest in its information technology business Debis Systemhaus and later the same year it sold its rail subsidiary, DaimlerChrysler Rail Systems GmbH (Adtranz) (Article 2001). At the time, the CEO of Daimler commented that the company wanted to concentrate more on its core businesses of automobiles and automotive products. A few months later DaimlerChrysler purchased the Detroit Diesel Corp, an engine maker (Business 2000).
Shortly after the merger, DaimlerChrysler promised significant expansion, at that time promising that it would create at least fifteen thousand jobs in the two years from 2000 to 2002 (Report 2000). However, it appears that this promised expansion was to be short lived and the business ran into some difficulties. This is supported by the way in which the divestitures have occurred in recent years. All of this culminated in an announcement early in 2006 (Berlin 2006) by DaimlerChrysler that was embarking upon a reorganization program, which meant the loss of at least six thousand jobs throughout its workforce as it sought to achieve savings in excess of $1 billion.
Since the merger, the group has only seen the development of a few new products, apart from upgrades on previous models. Predominantly, these new products have been in the Chrysler range, with the new Crossfire, which is powered by a Mercedes engine, and the light trucks Sprinter and Freightliner. With the succession of a new CEO, see details later in section 4 of this chapter, there is the promise of a much wider development of new product ranges in the future.
One of the issues that has dogged the corporation since the merger, and possibly contributed somewhat to its lack-luster performance, is the number of lawsuits that it has been involved in over this period. The most high profile of these is action taken by one of DaimlerChrysler’s biggest investors, the billionaire Kirk Kerkorian (Simpson 2000). Kerkorian has filed a $9 billion suit, claiming that the board of Daimler, and in particular the CEO, had lied at the time of the merger in order to get the votes it needed to succeed. The groups CEO at the time had claimed the merger to be a “merger of equals,” whereas Kerkorian claims the actual intention was for Daimler to affect a takeover. In the initial case, Kerkorian lost his case and, although he has appealed this decision, this has not been successful either.
In addition to this case, Daimler has faced a number of others. It settled $300 million with pension funds that were threatening to take it to court. However, in a recent decision in the German courts, former shareholders of Daimler prior to the merger have won a multi-million euro case for compensation for the value they received for their shares at the time (Business 2006). The company is to appeal this decision. In separate issues, it also had to endure a $1 billion euro claim from Bombadier over their purchase of the rail division, and a claim by employees over racial slurs. It is plain that such cases are impacting upon the groups performance.
At present, there are a number of events that will affect DaimlerChrysler’s cash flow and the group’s value.
a) Outcome of legal action. Should the appeal against the German court decision in favor of former shareholders not succeed, the settlement in excess of €200 million will have a significant impact.
b) Current profitability levels. In mid September 2006, the group announced a lowering of its full year profits for the year 2006 to $6.4 billion, partially as a result of expected losses in the Chrysler division. (See http://www.daimlerchrysler.com/). However, they are hoping that the introduction of eight new vehicles in the second half of the year will halt this decline.
c) Airbus earnings have also been affected adversely during the year. The impact that this on the groups financials is in addition to those which are mentioned in b) above.
All of the above have led to a position where the group’s market share, particularly at Chrysler, together with the drop in share price in September 2006, will put additional pressure on the company’s cash flow, and has already negatively affected its value.
Section 3 – Products and Competition
DaimlerChrysler has financial services and other sectors of business, which produce a little over 12% of its revenue. However, for the purpose of this paper, we will be concentrating our research on the automobile side of the business when discussing the company’s products and its main competitors.
Major products
Three main automobile product families form the core products of the DaimlerChrysler group.
Mercedes
At the top end of the range within the Mercedes group are the Maybach luxury cars, which were added to the group’s models in 2002. Much of this vehicles livery is hand crafted. At the core of the group is the Mercedes range, with its distinction of being the oldest car manufacturer in the industry. This range comprises of models from mid-range to luxury saloons and sports cars. Finally, there is the innovative Smart Car range, which was first launched in 1988. The unique design and concept, the first model being promoted as an ideal town car with its small size, has given these vehicles an almost “cult” following.
The Mercedes range is produced at six plants in Germany as well as one plant in each of France, Brazil, South Africa and the United States. Sales of the Mercedes range of vehicles are promoted globally. However, in 2005 (www.DaimlerChrysler.com) the main marketplaces were Germany (29%), Western Europe (35%), United States (19%) and Japan (4%). The exception to this is the Smart Car range which, whilst available in other markets, is not making its US debut until 2008.
With over one million two hundred vehicles sold in 2005, the Mercedes section contributed €50,015 million to the Groups revenues but, according to the annual report, reorganization of the Smart Car and other cost, this sector of the business actually made a loss of €505 million.
Chrysler
Chrysler offers a more varied range of vehicles under its three brands, which are Chrysler, Jeep, and Dodge. Chrysler and Dodge offer a full range of small to large saloons, together with sports models. In addition, both marques produce minivans. The Jeep marques concentrate on the production of four-wheel drive SUV’s catering for all sizes and similar vehicles. Chrysler also produces parts and accessories for its consumers and these are marketed under the Mopar brand.
The main concentration of the Chrysler brands production is in the US, where it has several manufacturing plants. However, it does have manufacturing and production facilities in Canada and Mexico and a few other strategic international locations, including Brazil, Asia and Austria. Sales of the product range are marketed throughout 125 countries internationally.
Although Chrysler had the largest unit sales in the group, at just over 2.8 million it exceeded Mercedes and the Truck division combined (www.daimlerchrysler.com), its total revenue contribution is on a par with Mercedes at €50,116 million. Unlike Mercedes, Chrysler made a profit of €1,534 million in 2005.
DaimlerChrysler Trucks
The Truck group sector of the business has the distinction of being the world’s largest producer of commercial vehicles. It has achieved this position through a range of acquisitions being built onto the core Mercedes and Chrysler models.
The products range covers vehicles from heavy to long haul truck, as well as public service vehicles, such as buses and other specialist heavy goods vehicles. The trucks division operates through six main brands, which include Mercedes, Freightliner, Sterling, Western Star, Thomas Built Buses and Mitsubishi Fuso. This sectors vehicle are manufactured and produced in nine locations globally, with the main core of these centers being concentrated in Germany, U.S., and Japan.
With 529,499 units sold in 2005, this sector of the business contributed €30,368 million to the groups revenue and €1,606 million to operating profits in 2005 (www.daimlerchrysler.com).
As can be seen from table 1., cost of sales, including manufacturing, production and workforce attributed to that area of the business, represents the single largest cost component for the business, consuming 82% of the groups revenue, with selling and administration, and research and development following respectively.
Table 1 Annual Report 2005
Source: DaimlerChrysler Annual Report 2005
Competitors
Although there are numerous automobile manufactures in the industry, in essence DaimlerChrysler has four main competitors. These are General Motors, Toyota, Ford Motor Co, Honda, and TATA. The largest of these would depend upon the criteria used. For example, in terms of revenue, General Motors is the market leader, just ahead of Daimler Chrysler, with Toyota in third position (see Table 2).
Table 2 Leading Automobile Manufacturers
Leaders in Total Revenue (ttm)
GEN MOTORS [GM]
$205.0 B
DAIMLERCHRYSLER AG [DCX]
$195.7 B
TOYOTA MTR CP ADS [TM]
$182.3 B
FORD MOTOR CO [F]
$170.4 B
HONDA MOTOR CO ADR [HMC]
$86.1 B
TATA MOTORS INC [TTM]
$5.8 B
Source: Yahoo Finance
In terms of market share, based on units sold, General Motors was the market leader in 2004 (Alan Ohnsman 2004), although in that year the three big Japanese companies made significant gains with increases of between 7 and 9%. At present the top five producers for 2004 on this basis are: –
1) General Motors 8.52 million units
2) Toyota 7.29 million units
3) Ford Motor 6.47 million units
4) DaimlerChrysler 4.19 million units
5) Honda 3.17 million units
With Nissan close behind Honda, these three companies are significantly closing the gap on the traditional market leaders. However, in terms of Revenue, DaimlerChrysler is actually in second place to GM, with Toyota and Ford third and fourth respectively.
Competition
Competition within the Automobile industry is fierce and the organizations involved use a variety of different methods as they vie for sales and market share. The Japanese manufacturers tend to compete based on price with feature levels. Their cost advantage over other manufacturers, in some cases as much as much as $3,000 (Alan Ohnsman 2004), makes this position viable and it is forcing companies such as General Motors and Ford Motor Co to offer substantial discounts to attract buyers.
The DaimlerChrysler group competes in a number of ways to suit each particular sector. For example, Mercedes uses quality and safety to markets its products, seeing itself in direct competition with companies such as BMW and AUDI, rather than the Ford models. Chrysler products are of a more general basis and they are now using price as their main promotional tool. The truck sector of the business uses two methods of promotion. First is the quality of the product and secondly, due to fact that it has a number of different marques within the range, it is able to affect the competition from several name fronts. The one unique area of products within the group is the Smart Car product. These vehicles are promoted by using their uniqueness and the creation of a cult following.
At the time of writing the dominant company within the automobile industry is General Motors. It’s strength comes from it’s historical position of growth, in the days before globalization, when it became the dominant auto company in the USA, at one time accounting for nearly fifty percent of all the automobiles sold in that country. During this time, it built a large number of plants across the country and consolidated its position through acquisitions. However, in recent years its dominant position has come under threat from the Japanese manufacturers, particularly Toyota, which resulted in a significant drop in the company’s market share. Although in 2005 General Motors managed to achieve a slight increase in its market share, the losses that has sustained, together with the strength of the opposition, its position is far from secure.
For DaimlerChrysler, the more worrying competitors to itself are the Japanese giants as, with products, which compete directly with its own vehicles, they present the greater threat to the German-US conglomerate.
Section 4 – Corporate Control
The ultimate corporate control of the DaimlerChrysler organization rests in the hands of a management board. Beneath this tier of management, there is a supervisory board in direct charge of each sector of the business sectors. In accordance with national and internationally regulations, it also has supervisory boards that control areas such as governance and audit committees, and whose task is to oversee management and organization activities. In addition, to this the corporation would also be influenced by its major investors.
Management Board
Dieter Zetsche (52) – Chairman / Head of Mercedes Car Group
Following the resignation of Jurgen E. Schrempp at the end of 2005, Zetsche took over as CEO of the business. Born in Turkey, Zetsche has a long history with DaimlerChrysler, having joined the business in 1976. He had a reputation for turnaround successes, exercising this ability first at Mercedes in Argentina before taking on a similar task with Freightliner in the US. Before becoming CEO, it was Zetsche who set Chrysler on the road to recovery.
Thomas W. LaSorda (51) – Chrysler Group
Thomas LaSorda moved to Chrysler from General Motors in 2000. He had been with GM for thirteen years, and this is where he learned about the automobile industry. LaSorda has been involved in labor relations and the automobile industry for most of his working life. He is the first non-German person to have been put in charge of the Chrysler operation since its merger with Daimler in 1988.
Andreas Renschler (47) – Truck Group
Renschler is a graduate in economic engineering. He joined Daimler in 1988 just before the merger with Chrysler. Since then, he has undertaken a number of international projects for the company in addition to involvement with its Smart car sector.
Bodo Uebber (46) – Financial Services
Bodo Uebber joined the group in 1985. He is a qualified accountant. He spent some time working as a director of finance at the Chrysler group in the US, before being appointed to his present position in 2004. His employment contract with the organization was recently extended by five years.
Thomas Weber – Group Research & Mercedes Car Group Development
After a seven-year term as Scientific Associate at Stuttgart University, Weber rejoined Daimler, where he had originally served his apprentice, in 1987. In 1994, he became head of all Mercedes engine production before being appointed to as a deputy to the management board and became a full member in 2004.
Management Compensation package
The total compensation package for the management board of DaimlerChrysler for 2005, as revealed in the Annual Report, was as follows: –
Fixed Compensation € 9.3 million
Short/Medium term performance related €24.6 million
Long-term performance related € 1.0 million
Making a total package of €34.9 million. In addition they were granted 454,914 phantom shares at a price of €35.41. Pension provisions were changed in that year to a defined-contribution plan. These benefits are comparable with other organizations in the industry.
However, the management of General Motors has been forced to take pay cuts, with the CEO reducing his by 50% (BBC News 2006) and none of the management will receive bonuses. Ford Motor Company management packages are under similar pressure.
With pressure being exerted on the US and European Industry from their Japanese competitors, as explained earlier, the implications are that the scale of management compensation packages at DaimlerChrysler will come under increasing pressure, unless they produce the improvements required by their stakeholders.
Institutional Shareholders
Institutional shareholders are important to any major corporation. They provide long term funding for the business (Blommstein & Funke 1998) and enable stability in its value. In addition, these shareholders are increasingly acting as guardians for the investors in the business. DaimlerChrysler have a number of Institution and Fund Management investors, including Deutche Bank, Kuwait Investment Authority and Dubai International.
General Motors have similar investors including Barclays bank, Southeastern Asset Management and Credit Suisse. Fords three main institutional shareholders are Brandes Investment Partners, Barclays Bank International and Deutche Bank.
Institutional recent share activity for the last six months has seen the following occur: –
DaimlerChrysler No details available
General Motors No Change
Ford Motor Company (81,204) sold
Section 5 – Financial Analysis
The financial information and analysis contained within this section has been researched from information available at www.finance.yahoo.com. The following are the comparable opinions for DaimlerChrysler, General Motors and Ford Motor Co.
Table 3 Analysts estimates
Daimler
General
Ford
2006
Chrysler
Motors
Motor Co
Average Earnings Estimates
3.01
3.74
-0.75
Number of Analysts
3
12
15
Average Revenue Estimates
193.46
170.88
147.76
Billions
Number of Analysts
2
10
9
Current Recommendations
Buy
3
6
0
Hold
2
7
6
Sell
1
2
8
Total Analysts
6
15
14
Seen against previous market estimates, DaimlerChrysler surprised the market with its last quarter earnings returning 2.84 against predictions of 1.00. General Motors have had a similar impact producing earnings of 2.03 in their June quarter against estimates of 0.55. Of the three analyzed only Ford produced a negative performance with its June quarter earnings coming in at -.03 against predictions of 0.12.
Based upon the above information, the analysts have predicted the following performance for the companies over the next five years.
Table 4 Five-year predictions
Daimler
General
Ford
Five year predictions
Chrysler
Motors
Motor Co
Average Earnings Estimates
16.70
8.40
0.00
Average Revenue Growth
2.20%
5.80%
6.70%
In our opinion, based upon the information that has been analyzed within this chapter, and the research that has been studied, we would suggest that these forecasts are on the optimistic side. In our opinion the continuing impact of the Japanese and Far East countries, together other issues such as environmental problems will certainly affect the profitability of the businesses. In this respect, we would say that the analysts estimates of earnings are at the top end of the range and the reality will fall short of this.
Chapter Two – Historical financial analysis
Within this chapter, it is our intention to produce an analysis of the financial performance of DaimlerChrysler over the past five years. To ensure continuity of data comparison, we shall continue to use General Motors and Ford Motor Co. data as comparables.
Stock Price and Performance
The following charts show the share performance of the three companies over the past five years.
From these it can be seen that DaimlerChrysler have performed significantly better than its two American based competitors, increasing its share value by approaching thirty percent during that period, although it has underperformed against the DOW, being some 20% adrift in performance comparisons. However, this still only leaves the shares at the same value as they were in mid-2002.
In comparison, General Motor’s shares have reduced in value by around twenty five percent. Despite this, in the past six months the company’s shares have virtually kept pace with the DOW performance, currently less than 5% adrift. Ford Motor, the most volatile performer of the three, has seen its share value almost halved and has consistently underperformed against the DOW, now currently around 60% adrift in terms of performance.
Based upon these results, if one had invested $100 in each of these companies in October, the following charts shows how that investment would have fared over the past five years.
Table 5 Share price comparisons
Daimler
General
Ford
Five year share price
Chrysler
Motors
Motor Co
October 8 2001
34.81
42.37
17.29
October 9 2006
49.99
31.90
8.19
Investment
October 8 2001
100.00
100.00
100.00
October 9 2006
143.61
75.29
47.37
It is clear from the above charts show that, out of the three organizations studied, DaimlerChrysler, despite not performing as well as the markets, has been the best performer of these, increasing the value by nearly 44%, and would have achieved an annual geometrical mean gain of 8.72%. General Motor’s value reduced by -24.71%, returning an annual geometrical mean loss of -4.94%. Ford Motor Co’s performance produces a decrease in value of -52.63%, an annual geometrical mean of -10.53%.
The charts reflecting the performance of the companies also show that all three companies performance showed significant deterioration of performance during the period from June 2002 to January 2004, when all of the shares returned approximately to June 2002 levels. However, from that time forwards, DaimlerChrysler is the only company that has seen a sustained improvement in its performance. General Motors and Ford both have experienced a continuous downward trend in their valuations up until mid-2006 when there was a mild improvement.
Financial Performance
The following section contains the historical information relating to the DaimlerChrysler and the two other companies being used as comparables, General Motors and Ford Motor Co. The information and charts, which have been used to provide this information, have been sourced from http://moneycentral.msn.com.
Growth Performance
DAIMLERCHRYSLER
Income Statement – 10 Year Summary (in Millions)
Sales
EBIT
Depreciation
Total Net Income
EPS
Tax Rate (%)
12/05
149,776.0
3,438.0
12,683.0
2,851.0
2.8
14.92
12/04
142,059.0
3,535.0
11,262.0
2,466.0
2.43
33.3
12/03
136,437.0
596.0
11,595.0
-418.0
-0.41
164.26
12/02
147,368.0
5,925.0
13,838.0
4,795.0
4.74
18.82
12/01
150,386.0
-1,654.0
14,632.0
-763.0
-0.76
0.0
12/00
162,384.0
4,476.0
13,897.0
2,465.0
2.45
44.66
12/99
149,985.0
9,657.0
9,565.0
5,106.0
5.06
46.94
12/98
131,782.0
8,093.0
7,331.0
4,949.0
5.03
37.24
12/97
117,572.0
6,145.0
6,303.0
6,547.0
6.78
-8.41
12/96
101,415.0
5,693.0
5,392.0
4,169.0
4.2
27.17
Growth Rates %
Company
Industry
S&P 500
Sales (Qtr vs year ago qtr)
0.40
10.30
17.40
Net Income (YTD vs YTD)
106.10
32.10
29.50
Net Income (Qtr vs year ago qtr)
145.60
20.10
37.30
Sales (5-Year Annual Avg.)
-1.60
6.21
11.45
Net Income (5-Year Annual Avg.)
2.95
5.76
13.45
Dividends (5-Year Annual Avg.)
-8.59
13.26
8.94
GENERAL MOTORS
Income Statement – 10 Year Summary (in Millions)
Sales
EBIT
Depreciation
Total Net Income
EPS
Tax Rate (%)
12/05
192,604.0
-16,931.0
15,769.0
-10,458.0
-18.51
0.0
12/04
193,517.0
1,186.0
14,152.0
2,804.0
4.95
-77.23
12/03
185,837.0
2,997.0
13,513.0
2,899.0
5.09
23.69
12/02
177,867.0
2,110.0
11,569.0
1,813.0
3.14
27.39
12/01
169,051.0
2,454.0
11,871.0
1,222.0
2.19
44.58
12/00
184,632.0
7,164.0
13,271.0
4,452.0
6.68
33.4
12/99
176,558.0
9,047.0
15,036.0
5,576.0
8.53
34.46
12/98
155,445.0
4,944.0
13,602.0
3,049.0
4.32
33.09
12/97
160,905.0
7,569.0
14,646.0
6,483.0
8.32
13.54
12/96
158,015.0
6,492.0
11,840.0
4,953.0
6.03
26.54
Growth Rates %
Company
Industry
S&P 500
Sales (Qtr vs year ago qtr)
12.20
10.30
17.40
Net Income (YTD vs YTD)
NA
32.10
29.50
Net Income (Qtr vs year ago qtr)
-242.40
20.10
37.30
Sales (5-Year Annual Avg.)
0.85
6.21
11.45
Net Income (5-Year Annual Avg.)
NA
5.76
13.45
Dividends (5-Year Annual Avg.)
0.00
13.26
8.94
FORD MOTOR Co
Income Statement – 10 Year Summary (in Millions)
Sales
EBIT
Depreciation
Total Net Income
EPS
Tax Rate (%)
12/05
177,089.0
1,996.0
5,945.0
2,228.0
1.14
-25.65
12/04
171,646.0
4,853.0
6,654.0
3,633.0
1.8
19.33
12/03
164,338.0
1,339.0
8,806.0
902.0
0.49
9.19
12/02
162,258.0
1,064.0
10,194.0
355.0
0.19
32.14
12/01
160,504.0
-7,419.0
15,478.0
-5,347.0
-2.95
0.0
12/00
169,091.0
8,299.0
14,493.0
5,456.0
3.62
32.78
12/99
160,703.0
9,854.0
11,846.0
6,502.0
5.26
32.96
12/98
143,350.0
24,280.0
10,890.0
21,368.0
17.19
11.37
12/97
153,627.0
10,939.0
9,865.0
6,920.0
5.62
34.2
12/96
146,991.0
6,793.0
9,519.0
4,446.0
3.64
31.89
Growth Rates %
Company
Industry
S&P 500
Sales (Qtr vs year ago qtr)
-5.80
10.30
17.40
Net Income (YTD vs YTD)
NA
32.10
29.50
Net Income (Qtr vs year ago qtr)
-127.10
20.10
37.30
Sales (5-Year Annual Avg.)
0.93
6.21
11.45
Net Income (5-Year Annual Avg.)
-16.35
5.76
13.45
Dividends (5-Year Annual Avg.)
-25.98
13.26
8.94
From the above information, it is clear that from a financial viewpoint, apart from Ford Motor Co’s exceptional results in 1998, the three businesses were performing on a par in terms of net income for the five years to 2000. For the three years from then to 2003, all of the businesses suffered, with at that stage DaimlerChrysler being the worst affected, before a limited recovery took place. General Motors suffered a serious setback in 2005, making a significant loss.
However taking the situation overall the automobile industry has historically been an under-achiever when one compares the last five years results with the S&P 500, in all areas except dividends. DaimlerChrysler has lagged considerably behind the industry in the same period on all counts, with net income only achieving half of the average, although it has been more stable than the other two comparable companies. It has also appears to have achieved a better level of stability over the past three years.
In general terms it is evident on these indicators that DaimlerChrysler is in a slightly superior position than the two US based organizations. It is most likely that the reason for this lies in the fact that it has more experience in dealing with an international marketplace. In this respect, the German company is more capable of being able to react to the requirements of consumers and stakeholders in a number of different cultures.
DaimlerChrysler has also shown itself more adept at being able to integrate acquisitions into its organization. Despite some initial unrest, the merger/takeover has proven more successful than Ford’s acquisition of the UK companies Jaguar and Land Rover.
Financials
Within this section of our report, we will outline the financial information relative to the three businesses. As with growth performance, we have again sourced the information from http://moneycentral.msn.com.
DAIMLERCHRYSLER
Financial Condition
Company
Industry
S&P 500
Debt/Equity Ratio
2.17
1.82
1.26
Current Ratio
1.5
1.1
1.3
Quick Ratio
1.2
0.9
1.1
Interest Coverage
NA
1.3
37.5
Leverage Ratio
68.5
57.4
29.1
Book Value/Share
44.77
35.84
17.89
Investment Returns %
Company
Industry
S&P 500
Return On Equity
11.2
11.1
22.5
Return On Assets
2.0
3.9
8.1
Return On Capital
3.4
6.5
10.7
Return On Equity (5-Year Avg.)
4.9
10.6
17.8
Return On Assets (5-Year Avg.)
0.9
3.4
6.1
Return On Capital (5-Year Avg.)
1.5
5.3
8.2
Management Efficiency
Company
Industry
S&P 500
Income/Employee
10,514
25,230
108,142
Revenue/Employee
509,126
552,772
834,109
Receivable Turnover
2.3
8.0
27.1
Inventory Turnover
6.6
9.6
9.5
Asset Turnover
0.8
0.8
0.8
GENERAL MOTORS
Financial Condition
Company
Industry
S&P 500
Debt/Equity Ratio
3.90
1.82
1.26
Current Ratio
NA
1.1
1.3
Quick Ratio
NA
0.9
1.1
Interest Coverage
-0.7
1.3
37.5
Leverage Ratio
79.6
57.4
29.1
Book Value/Share
20.58
35.84
17.89
Investment Returns %
Company
Industry
S&P 500
Return On Equity
-62.8
11.1
22.5
Return On Assets
-2.5
3.9
8.1
Return On Capital
-3.0
6.5
10.7
Return On Equity (5-Year Avg.)
-1.7
10.6
17.8
Return On Assets (5-Year Avg.)
-0.2
3.4
6.1
Return On Capital (5-Year Avg.)
-0.2
5.3
8.2
Management Efficiency
Company
Industry
S&P 500
Income/Employee
-33,545
25,230
108,142
Revenue/Employee
611,946
552,772
834,109
Receivable Turnover
2.0
8.0
27.1
Inventory Turnover
13.2
9.6
9.5
Asset Turnover
0.4
0.8
0.8
FORD MOTOR Co.
Financial Condition
Company
Industry
S&P 500
Debt/Equity Ratio
11.08
1.82
1.26
Current Ratio
NA
1.1
1.3
Quick Ratio
NA
0.9
1.1
Interest Coverage
NA
1.3
37.5
Leverage Ratio
91.7
57.4
29.1
Book Value/Share
7.26
35.84
17.89
Investment Returns %
Company
Industry
S&P 500
Return On Equity
-9.5
11.1
22.5
Return On Assets
-0.4
3.9
8.1
Return On Capital
-0.5
6.5
10.7
Return On Equity (5-Year Avg.)
3.2
10.6
17.8
Return On Assets (5-Year Avg.)
0.2
3.4
6.1
Return On Capital (5-Year Avg.)
0.3
5.3
8.2
Management Efficiency
Company
Industry
S&P 500
Income/Employee
7,720
25,230
108,142
Revenue/Employee
524,611
552,772
834,109
Receivable Turnover
1.6
8.0
27.1
Inventory Turnover
12.9
9.6
9.5
Asset Turnover
0.6
0.8
0.8
The preceding indicators give a broader of Daimler’s performance, together with the other companies. It is clear that the financial condition of their company is closer to the industry and market mean than the others. Indicators also prove that Daimler is the most stable of the three organizations and the better investment. The investment indicators, both current and historic, show how much better Daimler is faring in this respect. Therefore, this would make its stakeholders feel more secure.
Measured by management efficiency, the results also prove that of the three Daimler is the leading company, with General Motors lagging far behind.
Summary
In study DaimlerChrysler in comparison with General Motors and Ford Motor Co., we have sought to study its performance against competitors that have similar management ethos, historic structures and organizational constraints. In addition, they have all been subjected to the same employee conditions in respect of demands for pay structures, pension, health and other benefits, although the latter problems are now being addressed.
Currently DaimlerChrysler is in a better financial and corporate position than the other two competitors are. However, despite the advantage it has in this comparison, the company is still faced with some severe pressures in terms of the future. Not least of these will be its ability to compete with the continuing onslaught that the Japanese manufactures are making on the industry.
If DaimlerChrysler is to continue to achieve sustainable growth, it needs to adapt its business to a format that more closely resembles these Far East organizations. It will need to re-evaluate its production and manufacturing procedures to achieve similar levels of returns and values, and at the same time analyze the specific reasons behind the success of companies such as Toyota, particularly in their ability to market and sell their products, thus continuing to gain market share.
Since the change of management at the top of DaimlerChrysler, is has stabilized its position. However, that position is still somewhat precarious. As a matter of some urgency, the management needs to use that stability to introduce the necessary changes in its systems and procedures, in order that these can serve as a platform for continued and sustainable growth. Unless it takes this opportunity, the company could find itself struggling to maintain its current market share and position.
References
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[1] Sports Utility Vehicles
[2] European Aeronautic and Defense company.
