Which Is the Stronger Partner in the Merger? In May 1998, Daimler-Benz and Chrysler announced…

Which Is the Stronger Partner in the Merger?

In May 1998, Daimler-Benz and Chrysler announced their intention to merge. DaimlerBenz was the largest industrial company in Europe, and Chrysler was Number 3 of the Big Three automakers in the United States. The merger resulted in DaimlerChrysler becoming (at the time) the second largest automobile company in the world with 2000 sales exceeding $150 billion (General Motors reported sales in 2000 of $160 billion).
An interesting question is, “At the time of the merger, which of the two companies was the stronger?” Below are summary data for the two companies, both overall and for their respective automotive divisions.

The amounts are in millions of Deutsche marks for Daimler-Benz and millions of U.S. dollars for Chrysler.
For the automotive segment information, net income is the operating income for the segment and total assets are the assets that are identifiable with the segment.

1. Compute the following for both companies for overall results and automotive division results:

a. Return on sales

b. Asset turnover

2. In comparing the ratios calculated in (1), why don’t you have to make adjustments for currency differences?

3. Which company had more worldwide automotive sales in 1997? Note: Don’t forget the currency difference.

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