M E R G I N G A M C I N T O C H R Y S L E R

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Company profile:
AMC:
•  Created in 1954 by the merger of automobile manufacturers
Nash-Kelvinator and Hudson Motors
• In 1956 AMC produced the first modern U.S. compact car, the
Rambler
CHRYSLER:
Chrysler Corporation is the number three automaker in the
United States
SUMMARY:
• This case is about AMC which was among the big 4 companies after
general motors, Ford, and Chrysler.
• AMC had annual sales of $3.5 billion which made it a large
organization.
• It was acquired by Chryslers for its high popularity and profitable line
of jeeps.
• The merger of the two companies has been described to be quite a
challenging task when it was acquired in the summer of 1987.
 At the time of Chrysler’s purchase of AMC, was Chrysler a growing, stagnant, or declining
organization? How about AMC?

• At the time of Chrysler’s purchase of AMC –

• Chrysler was a declining organization

 Chrysler’s line of cars had slid 16 percent.

 Chrysler’s pre-tax profit margin was going down to 8.3% from 10.2% in 1986.

• AMC was a declining organization.

 AMC previously was successful because they were designing cars for masses which were left unattended by their 3 major competitors
General Motors, Ford, and Chrysler.

 But after 1970 their successive CEOs were not able to introduce new models of cars and the competition also increased in the small car
industry.

 AMC was having no profit & no loss; they were struggling to sell their product and make financial changes. Chrysler had taken over a
major part of the market share, Japanese carmakers Honda & Nissan were boosting production in their new U.S factories & Korean
automakers, particularly Hyundai rapidly expanding their market share. So, as of 1986, there was no turnaround for AMC.

 At that time Inorganic growth takes place as Chrysler buys a 46% stake in AMC in 1987 and with the course of time complete merger
and takeover takes place in 1992.

 So both AMC and CHRYSLER were also In the declining stage but through merger, it revived its position, through negative
entropy.
How does the purchase of AMC help Chrysler to
manage its environment?
After purchasing AMC, Chrysler managed its environment by using the following
technologies.
• Cost cutting.
• Close monitoring.
• Increasing production by paying overtime.
• It further utilized the resources of AMC to further improve the efficiency of the
organizations, so there exists a competitive resources dependency among the two
organizations as they are having inter organizational relationship through merger
and acquisition.
Are management efforts to increase effi ciency
through reductions in staff indicative of an
organization in decline? Discuss?

• Fro m th e c a s e, w e o bs e r v ed t h a t a f t e r m e r g i n g , i t w a s
o ve rs t aff e d.
 
• He us ed di v i s i o n of l a bo r to s ep a r a t e th e n o o f t a s ks a n d c o s t-
c ut ti n g m e th o ds t o r e du ce i t s e xp e n s e s a n d i m p r o ve
p ro fi t abi l i t y.
 
• S o , n o i t do e s n ot i n dic a t e a n o r g a n i z a t i o n i n to t a l de c l i n e.
T hey t urn e d a r o un d f r o m a de cl i n i n g s ta g e th r ou g h n e ga t i ve
e nt r op y.

• Re duc i ng th e s t a ff w a s r a th e r a m ea s ur e t o g e t u p f r o m th e
de cl i n e s t ag e .
How is the acquisition of AMC likely to change
Chrysler's organizational structure?
• Chrysler acquires AMC which results in merging with the organization.

• Complexity is decreasing as spatial, horizontal, and vertical differentiation is

decreasing.

• Formalization is happening as people are being recruited according to job i.e.,

division of labor concept, also standardization of product is taking place.
 If you had been Iacocca in August 1987, what actions
would you have taken to reduce resistance among AMC
personnel to changes caused by Chrysler’s acquisition?

If I would have been in place of Iacocca in August 1987, I would have taken the following
steps to reduce resistance amongst AMC personnel.

• Train Employees so that they adjust to a new culture

• Increase Salary of employees so that they are happy with the new management. It won’t
affect Iacocca as he has closed a few plants.

• Set strict rules and regulations so employees don’t waste time and work efficiently and
effect responsibilities new and more responsive to the performing employee and set an
example to other employees by giving him promotions and increment with few
authorities and responsibility.
THANK YOU
Question and Answers