The German industrial giant Daimler-Benz and US car manufacturer Chrysler have agreed to merge in a multi-billion pound deal which will spark a revolution in the world's motor industry.

BBC News' Chris Hogg reports on the US/German merger

The deal, which took analysts by surprise, will create a company by the end of this year valued at around $92bn (£55.4bn) with annual sales of $130bn (£78.3bn). It is the world's biggest industrial merger.

The BBC's Jonathan Charles: unusual marriage (40")

Although Daimler will control 57% of the new company, to be called DaimlerChrysler, it described the agreement as a merger of two equals and said the two companies were "a perfect match."

Jurgen Schrempp explains the merger

The new company will be led jointly by Daimler Chairman Jurgen Schrempp and Chrysler chief Robert Eaton.

Mr Schrempp said: "This is a historic merger that will change the face of the automotive industry."

The third biggest US car maker, Chrysler has 94,300 US employees and a 16% share of new vehicle sales in the United States this year. Only General Motors and Ford sell more, with shares of 31% and 24% respectively.

Jurgen Schrempp: "Merger a further attempt to globalise" (16")

As well as cars, Daimler, which is Germany's largest industrial group, is also involved in aerospace, defence and financial services.

Driving the merger plans are Chrysler's desire to build up its presence in Europe, where it is overshadowed by its American rivals, as well as European and Japanese makes, and Daimler-Benz's ambitions to expand on the other side of the Atlantic.

Reversal of fortune

It marks a major turnaround for Chrysler which as recently as 1979 was on the brink of going bust.

Since then, Chrysler has turned itself into the lowest cost car producer in the US, specialising in sports utility vehicles and low priced cars.

Through its Mercedes subsidiary, Daimler-Benz has a major foothold in the opposite end of the car market, in high-priced luxury models.

Industry analysts believe the fact that there is so little overlap between the two companies makes the deal a good fit, but some have been sceptical about whether they can bridge the cultural gap between the respective boardrooms.

However, they agree that other top motor companies will now be forced to consider pooling their resources in the face of competition from a new world force.

Fiat and Ford are seen as prime candidates for a possible merger, analysts say.

Back to top | BBC News Home | BBC Homepage	©