Industrial relations aspects of the Daimler-Chrysler merger

After Germany's Daimler-Benz AG and USA-based Chrysler Corporation announced the largest industrial merger in history in May 1998, the affected trade unions - the German IG Metall and the American UAW - started joint talks aimed at establishing new institutional forms of cooperation at the merged Daimler-Chrysler company.

On 7 May 1998, two of the world's leading car manufactures, the German Daimler-Benz AG and the USA-based Chrysler Corporation announced the largest industrial merger in history. The new company, to be called Daimler-Chrysler, will be the world's fifth-largest car maker with combined revenues of around USD 130 billion, a combined operating profit of around USD 7 billion, and a combined workforce of more than 420,000 employees - see below.

Revenues, profits and employment of Daimler-Chrysler, 1997
Daimler-Benz AG Chrysler Corporation Daimler-Chrysler AG (pro-forma)
Revenues USD 68,917 million USD 61,147 million USD 130,064 million
Operating profit USD 2,404 million USD 4,723 million USD 7,127 million
Number of employees 300,168 121,000 421,168

Source: Daimler-Benz AG 1998

In a joint press release, the president of Daimler-Benz, Jürgen E Schrempp, and the president of Chrysler, Robert J Eaton, declared that there will be no plant closures or lay-offs as a result of the merger. Since both companies have very different but complementary product lines - with the German company serving the high and luxury range car market, while Chrysler has a medium-range car, van and sports-utility vehicle product line - the potential for rationalisation with negative employment effects is quite low.

Against this background, both major trade unions at Daimler-Chrysler, the German metalworkers' Union IG Metall and the US United Auto Workers (UAW) unin expressed their support, in principle, for the merger. However, some trade union representatives took a rather sceptical view. For example, the regional leader of IG Metall's Baden-Würtemberg regional organisation, Gerhard Zambelli, judged the management's announcement that there would be no job losses in consequence of the merger as a kind of "tranquiliser for the employees". In reaction to the merger's announcement, the general works council at Daimler-Benz asked the company to extend the existing written job guarantee (DE9703105N) from the end of 2000 until the end of 2002, but the management gave only a declaration of intent saying that "the merger should create no disadvantages for the employees, such as decrease of employment for the reason of rationalisation or outsourcing."

The new Daimler-Chrysler company will be incorporated in Germany and therewith will fall under the German 1976 Co-determination Act (Mitbestimmungsgesetz) which guarantees an equal proportion of employee representatives on the supervisory board (Aufsichtsrat) of companies of a certain size and type. At the moment, the supervisory board of Daimler-Benz has 20 members including 10 representatives of the shareholders and 10 employee representatives, seven of whom are works council members from the different German Daimler-Benz plants and three are external trade union representatives from IG Metall. While the management has already announced that half of the number of the shareholders' representatives on the future supervisory board at Daimler-Chrysler AG will be German, and half American, the composition of the employee side is still rather unclear. In legal terms a "German company" usually has only German employee representatives on its supervisory board, who have to be elected by the company's German workforce.

To tackle this problem, both of the affected trade unions, IG Metall and UAW, have already started joint talks for a new institutionalised form of cooperation at Daimler-Chrysler. The proposals which have been made so far range from the establishment of a world works council at Daimler-Chrysler, to regular joint preparatory meetings in the run-up to the supervisory board meetings or the direct involvement of UAW representatives on the supervisory board. Although there has been no final agreement so far, both unions agree on the necessity for close cooperation to make sure - in the words of the president of the UAW, Stephen P Yokich- that "this merger works for the workers of Daimler-Chrysler, not just the stockholders."

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