Daimler: Corporate Rap Sheet

Daimler

By Philip Mattera

Daimler, one of the world’s leading producers of motor vehicles, dates back to operations set up by the two German engineers widely credited with inventing the automobile. The company’s profile diminished in 2007 when it sold off third-ranking U.S. carmaker, Chrysler, which it had acquired in a high-profile merger nine years earlier. Daimler is trying to survive the ongoing crisis in the auto industry with a product line that includes both high-end Mercedes-Benz luxury models and the inexpensive micro compact Smart Car. In 2010 it paid $185 million to settle international bribery charges.

 

Environment and Product Safety

Like other European automakers, Daimler resisted the shift pioneered by Toyota toward hybrids. It did, however, embrace the idea of highly fuel efficient conventional vehicles. In the 1990s it joined with Swiss watchmaker Swatch to develop a tiny two-seater, the Smart Car. In 1998 Daimler bought out Swatch and turned the diminutive vehicle into a cult favorite, first in Europe and a decade later in the United States.

In 2009 Daimler announced plans to develop an electric version of the Smart Car in cooperation with Tesla Motors. Several months later, Daimler acquired a stake of nearly 10 percent in Tesla. In June 2009 Daimler launched its first hybrid model, a version of the Mercedes S Class.

The 1998 merger with Chrysler joined Daimler with a U.S. carmaker that, like its competitors GM and Ford, had a history of controversies over safety, pollution, and workplace safety. During the period that Daimler and Chrysler were together, some of those issues flared up again.

In July 2000 DaimlerChrysler agreed to pay $400,000 to settle charges by the U.S. federal government’s National Highway Traffic Safety Administration that the company failed to promptly report fuel-line defects involving its largest cars and a clutch problem with its Ram trucks.

In 2001, after federal regulators found that locks on the rear sliding door failed in crash tests, DaimlerChrysler announced a recall of one-third of that year's Chrysler minivans.

In 2005 DaimlerChrysler agreed to spend more than $90 million to settle charges by the U.S. Environmental Protection Agency that the company violated the Clean Air Act by failing to properly disclose defective catalytic converters on nearly 1.5 million Jeep and Dodge vehicles for model years 1996 through 2001. The company said it would repair the emission equipment, and extend the warranty on the converters for the vehicles involved. In a similar case the following year involving imported Mercedes models, the company agreed to pay $1.2 million in civil penalties.

In 2007 Daimler paid a $30 million fine for failing to meet federal fuel-economy standards on its 2006 fleet of imports to the United States.

 

Anti-competitive Practices and Consumer Protection 

In 2001 the European Union found that DaimlerChrysler had violated competition rules by restricting cross-border sales of its Mercedes cars in Europe, thereby limiting price competition among dealers. The company was fined about US$65 million. In 2005 the EU’s Court of Justice reduced the fine to about $12 million.

 

Bribery 

In April 2010 Daimler agreed to pay a total of $185 million to settle civil and criminal bribery charges brought under the U.S. Foreign Corrupt Practices Act. As part of the plea agreement, two Daimler subsidiaries pleaded guilty to criminal charges. The company was alleged to have engaged in bribery in at least 22 countries.

 

Racial Discrimination 

In the early 2000s DaimlerChrysler was hit with several lawsuits in U.S. federal court alleging that the company’s U.S. finance arm discriminated against African-Americans and Latinos by charging them higher interest rates on car loans than those offered to whites. In 2005 the company agreed to settle the suits by spending more than $3 million on employee training and public education and by offering low-cost loans to minority applicants.

 

Labor

In its home country of Germany, Daimler has traditionally had a cooperative relationship with unions. In 1984 the company was caught up in the union IG Metall's national strike that succeeded in reducing the standard work week in the auto industry from 40 to 38.5 hours with no reduction in pay. The union had more difficulty improving conditions after the company began facing competitive and financial difficulties in the early 1990s.

Daimler's labor relations have sometimes been less harmonious in other parts of the world. At a 1988 meeting of rank-and-file workers from half a dozen countries, there were reports of serious tensions between Daimler management and unions in various locations, especially in Brazil and South Africa. In 2002 Daimler signed a social responsibility agreement in various countries with a coalition of unions under the auspices of the International Metalworkers Federation.

The plant in Alabama that Mercedes-Benz built in the 1990s has remained non-union. The United Auto Workers union announced an organizing drive in 1999, but it was unsuccessful. In 2003 U.S. Labor Department announced that the company would pay more than $600,000 to workers at the plant to compensate them for uniform changing time. 

The UAW made another run at the Alabama plant in 2006, as did the Machinists, but neither succeeded. In 2008 Mercedes reduced production, shortened the paid workweek to four days and offered buyout packages to workers. In 2010 the company decided it needed more workers in the body shop but decided to use 500 temps.

After Daimler-Benz acquired Chrysler in 1998, IG Metall agreed to give one of its seats on the company’s supervisory board to the United Auto Workers. The UAW easily negotiated a new contract for its Chrysler units, but it also set its sights on organizing the Mercedes plant that Daimler had opened in Alabama in 1997. Even though the company agreed to remain neutral, the plant was not organized.

The relationship between DaimlerChrysler and the UAW largely came to an end in 2007, when the company announced plans to sell 80 percent of the Chrysler operation to private equity investor Cerberus Capital Management.

In 2014 the National Labor Relations Board found that Mercedes management violated federal labor law by prohibiting workers from distributing union literature as part of a renewed organizing effort at the Alabama plant.

 

Subsidies

When Mercedes-Benz decided in 1993 to build an assembly plant in Alabama, it was not the first time that a foreign automaker had gotten subsidies to operate in the United States. But the tax breaks and other assistance assembled by state and local officials set a new record for a so-called “transplant.” The Wall Street Journal, which estimated that the total cost would exceed $300 million (while Alabama papers spoke of a $253 million deal), wrote that “the price is steep.” The Journal’s figure worked out to $200,000 for each of the expected 1,500 jobs at the plant, which was built in the small town of Vance near Tuscaloosa.

In 2000 Mercedes announced a $600 million expansion in Vance, for which it received another $119 million in subsidies. The following year Mercedes got an $11 million property tax abatement for an expansion of its body shop that created no new jobs.

 

Other Information Sources

Violation Tracker summary page

 

Watchdog Groups and Campaigns

Greenpeace International

International Metalworkers Federation

Natural Resources Defense Council

Union of Concerned Scientists

 

Key Books and Reports

Taken For A Ride: How Daimler-Benz Drove Off with Chrysler by Bill Vlasic and Bradley Stertz (2000).

The Star and the Laurel: The Centennial History of Daimler, Mercedes and Benz by Beverly Rae Kimes (1986).

 

Note: This page draws from a corporate profile originally prepared by the author for the Crocodyl website in September 2009.

Last updated April 18, 2015.