Bill Vlasic - Taken for a Ride : How Daimler-Benz Drove off with Chrysler

The deals keep getting bigger.

The two men faced off in a dreary hotel room

Eaton had wondered which foreign competitor might make a move

Iacocca flew to Palm Springs the morning after Kerkorian said

Eaton was alone in his office when Jim Holden arrived

Dick Bott had just returned from his vacation in France

Jim Holden watched the O. J. Simpson verdict on CNN

We cant continue, Jrgen. We have to stop. We have

Bob Lutz had found a German partner he liked better

On December 1, Eaton told Tom Stallkamp that the Chrysler

The sun was just coming up in England on March

The press release went out at 7 A.M., London time,

The traffic barriers went up on Broad Street on the

The day after Harris quit, Mercedes-Benz of North America threw

The U.S. auto market was heading toward the best year

Lee Iacoccas grandchildren scampered around the room, and the black-tied

T he deals keep getting bigger.

Merger mania gripped the business world in 1998. Oil-industry titans Exxon and Mobil fused together four months after British Petroleum acquired Amoco. Citicorp merged with Travelers Group into a financial-services conglomerate a week before BankAmerica joined up with NationsBank. Telecommunications companies fell like a blur of alphabetized dominoes. AT&T took TCI, Bell Atlantic Corp. hooked up with GTE, and SBC Communications bought Ameritech.

But every oil deal, bank marriage, and phone merger paled in comparison to the shocker of the year, Daimler-Benz AGs $36 billion buyout of Chrysler Corporation. Daimler, the biggest company in Germany, reached across the Atlantic and grabbed an American industrial icon, setting off an unprecedented frenzy of consolidation in the global automotive industry. Scrappy, patriotic Chrysler, the smallest of Detroits vaunted Big Three, lost its independence. Proud and powerful Daimler showed the world that German ambitions extended far beyond Europes borders. The creation of DaimlerChrysler was the greatest of experiments in cross-cultural corporate combinations, and the new benchmark for international deals of an epic scale.

Its a story of cars: uniquely German luxury sedans and unabashedly American sport-utility vehicles. Its a tale of the corporate ideals behind the three-pointed Mercedes star atop Daimlers headquarters in Stuttgart and the five-sided pentastar that graces Chryslers office tower in the suburbs of Detroit. But mostly its the saga of men who found themselves at the same crossroad for entirely different reasons. This book cannot judge the ultimate success or failure of the sprawling entity called DaimlerChrysler, the employer of 428,000 people and manufacturer of 11,000 cars a day. The merger is too fresh, the changes too complex, and the results too inconclusive. But in an age when globalization seems the pat answer to hard economic questions, the Daimler-Chrysler deal presents a singular perspective. The union of Daimler and Chrysler is a road map, a trail forged by two transatlantic pioneers, a blueprint of the perils of going global. Americans and Germans alike were taken for quite a ride. Their journeys end is still uncharted.

T he two men faced off in a dreary hotel room at the Detroit Metropolitan Airport, emissaries from different worlds at a dangerous intersection on the morning of April 10, 1995.

Alex Yemenidjian laid a black-covered document titled Project Beta on the table. Darkly handsome with olive skin and slicked-back black hair, Yemenidjian was the protg of Kirk Kerkorian, one of the worlds richest men and the owner of thirty-six million shares of stock in Chrysler Corporation. Born in Argentina, raised in Los Angeles, and fiercely proud of his Armenian heritage, Yemenidjian seemed coiled, tightly wound, a little nervous.

It is our understanding you are familiar with the model, Yemenidjian began stiffly, his accent an exotic mix of Spanish and Armenian dialect.

Tom Denomme sized up the smooth-talking casino executive in the Hugo Boss suit across from him. He had to be very careful.

Yeah, were familiar with it, Denomme replied. What is the specific message you would like us to carry to Bob Eaton?

Time is of the essence, Yemenidjian said.

Denomme stared him in the eye.

Where is the money coming from? he asked.

Dont worry about that, Yemenidjian said coolly. Just tell Bob Eaton that we are going to do it.

Denomme, the fifty-four-year-old vice chairman of Chrysler, was nicknamed The Priest for his serious, circumspect demeanor and measured counsel. Tall, with chiseled features, his thinning brown hair meticulously parted and graying at the temples, Denomme could have played the strong, silent Gary Cooper role of sheriff in an old Hollywood western. He wasnt about to reveal anything to this slick stranger from Las Vegas. A few weeks earlier Denomme had met in this same hotel with Gary Wilson, the high-flying financier who engineered the takeover of Northwest Airlines. Wilson had already laid out Project Beta for Denomme. Things were moving fast. It wasnt a matter of weeks anymore. The clock was ticking down.

If Kirk Kerkorian had the money to buy Chrysler, the seventh-biggest corporation in America, Denomme couldnt stop him. But Denomme could not fathom how it had come to this. If Kerkorian thought Chryslers management would join him in a leveraged buyout, he was sorely mistaken. Instead, Chrysler stood ready to fight him.

D ENOMME AND G ARY V ALADE , Chryslers chief financial officer, left the airport and drove to company headquarters in Highland Park, Michigan, a decaying industrial enclave on the edge of Detroit. They took the elevator to the fifth floor of the K. T. Keller Building, and Denomme called his boss. Chrysler Chairman Robert Eaton took the call in New York, where he was meeting with Wall Street investors before the 1995 New York Auto Show.

Bob, we cant be a party to any of this, Denomme said. Weve just been through this whole cultural thing, convincing everybody that this is such a different company. For us to jump on the side of a buyout would be just traumatic.

Eaton didnt say much. He never did. He agreed with Denomme and hung up.

Y EMENIDJIAN AND HIS AIDE , Dan Taylor, flew back to Las Vegas and sped to a small, sun-splashed, two-story office building a mile from the Strip. They went straight to Kerkorian. A tennis fanatic and onetime amateur boxer, Kerkorian looked much younger than his seventy-seven years. A shade under six feet tall, he had a wiry physique, deep tan, and full head of graying black hair swept back in a pompadour. His features seemed oversize: large ears; bushy, arching eyebrows; a wide toothy smile. Kerkorian was worth about $3 billion, but he was courtly, deferential, almost shy. Everyone he encountered received the same soft-spoken greeting. Please, he would say, call me Kirk.

So, Kerkorian said, howd it go?

The deal was on track, Yemenidjian said. For six months feelers had been put out to Chrysler executives about an enormous deal to take one of the worlds biggest companies private, to buy all its stock and own it. Kerkorian was convinced it could be done. Chrysler stock was so cheap, $40 a share, and the company was a money machine, throwing off $1 billion in excess cash every quarter. This was the third face-to-face meeting between the two sides. Denomme seemed very intrigued, Yemenidjian said. He never raised any objections and asked a lot of questions. Everything looked set. All that was left was for Kerkorian to call Bob Eaton and give him the word.