Someone Who Lived Through A Failed Merger
Provides A Real-Life Lesson In What Can Go Wrong

Tony Cervone

When asked to provide a response to the previous speaker, Dr. Fritz Kroeger, who talked about why mergers fail, Tony Cervone admitted that he couldn't be totally objective about the subject matter he was addressing - and with good reason.

Now executive director of executive communications at General Motors, Cervone was vice president of communications at Chrysler when the merger talks with Daimler-Benz took place.

As a member of the pre-merger planning team and communications representative on the post-merger integration team for the Daimler and Chrysler merger, Cervone was intimately involved in the ill-fated marriage of the two automotive giants. "I don't blame anybody for any particular thing that happened with the merger," he said. "There's enough blame to go around. But the fact is, no one would consider it a successful merger. It has not driven value to the shareholders by any stretch of the imagination, and being a shareholder, I can attest that that's not a good thing."

"But despite it all," Cervone said, "we learned some valuable lessons and that's what I want to talk about today."

Cervone said he agreed with everything Kroeger had said. Various consulting agencies had given the Chrysler planning teams something similar to the "seven deadly sins." "Sometimes there were six 'sins', sometimes eight or 10," he said. "But basically they covered the same things. They are really universally shared tenets among merger and acquisition consultants."

In fact, he had seen something similar to the "seven deadly sins" during the AMC/Chrysler merger in 1987 when he was on Lee Iacocca's speechwriting staff at Chrysler, one of the many roles he played during his 14 years with that company. "I wasn't as intimately involved in those merger talks as I was in the DaimlerChrysler merger," he said, "but I can tell you that that merger also had some rough times."

Part of the problem, Cervone admitted, is that "when you're going through a merger, you don't believe you are committing any of these 'deadly sins.' You absolutely think you're doing it right."

Cervone said that rather than go through all of the "seven deadly sins" he would cover those that he thought were most applicable to his situation.

Starting with corporate fit versus corporate vision, he said that at the time the merger was announced, it was "My God, German engineering and Chrysler design. A match made in heaven: the international presence of Daimler-Benz and the North American presence of Chrysler. It was the perfect fit. It was going to work."

Corporate vision, however, proved to be much more difficult. Vision statements are action-based and lead to behavior, Cervone said, and the critical elements are intertwined with other elements of corporate culture. "When the vision statement was presented to the senior management team," he said, "they decided that the corporate vision was going to be to consolidate the operations so that it was a transportation company. But Daimler-Benz was a lot more than a transportation company. They were into satellite services, telecommunications, banking, railroads, airplanes and tons more. And yet they decided they were going to be a transportation company. That was the vision. But it didn't drive behavior or develop a corporate culture. And that, I think, is where it started to fall apart."

As far as the leadership team was concerned, Cervone said they followed every rule that Kroeger talked about, putting people in boxes early on, naming people to the management board, deciding on the Chairman. "But then Bob Eaton (Chrysler CEO) surprised everyone by announcing that he was retiring. Most of us wanted to kill him because he was supposed to be in charge of the integration of the two companies. Suddenly we weren't sure that we had the real long-term leaders of the company in place. But we checked off the leadership box anyway and kept motoring on."

The most contentious issue in the merger, Cervone acknowledged, was overcoming cultural differences. There were discussions about the differences between the German culture and the American culture and how to assimilate them. Both Jurgen Schrempp (Daimler-Benz CEO) and Eaton argued that you didn't need to do that, and, Cervone said, "I agreed with them, to a point. The business culture was what was critical, not the national cultures. And the business cultures of the two companies were very, very different."

There were long and heated discussions about corporate culture, he said, and the behavioral traits that existed at the two companies. In the end, they decided that if the differences were far apart, they would pick a spot in the middle and they would merge. "In other words, they didn't decide what to do with the culture; they just decided to compromise it," he said.

"It was a sure-fire way for disaster," Cervone said, "and it has worked out that way. If you don't manage your culture, it just evolves to the dominant culture and I think that's what we're seeing."

Communications was another area where they fell short, Cervone said, because there were differences about what needed to be communicated and how to communicate. "In Europe, and particularly Germany, the expectation was that if you tell them what it is you want, then they'll act that way," he explained. "It was completely different from what we were doing at Chrysler. We had a much more in-depth way of communicating with employees. And we used every tool we had to communicate with Chrysler people. But we didn't realize until it was too late that we could not communicate the same thing across the world and that everybody would receive it the same way.

Cervone's final point was that you need to be prepared in case you are ever confronted with a merger or acquisition. "Whether you know it or not," he said, "you're very prepared for merger communications because it's the same principles as crisis communications. It calls for clear, concise decision-making and clear concise messaging. You're prepared to do that. What you're not prepared for is to be totally objective in how you go about communicating when you're in the throes of this thing. Everything that can go wrong will go wrong, and you need to be ready to react to it."

Since consolidation is happening in every industry, it behooves everyone, Cervone said, to have somebody in line that you can turn to when faced with a merger. "There are companies like A. T. Kearney and others who have been through it before. Take advantage of their hindsight. It would be very much to your benefit if you would take that step in order to be ready when it happens.