German luxury car maker Daimler-Benz AG and the US Chrysler Corp have sealed the terms of the biggest industrial merger in history at an executive summit in London's Dorchester Hotel.
Daimler chairman, Mr Jurgen Schrempp described the transatlantic merger, which creates the world's fifth-largest car producer behind General Motors, Ford, Toyota and Volkswagen, as a "marriage made in heaven".
His enthusiasm was echoed by stock markets, where Daimler and Chrysler shares surged, and by a German press wary of any deals that could add to the country's record post-war unemployment.
But in Japan, the new threat from the West led to a sharp fall in automotive share prices. Leading the drop was Nissan, whose Tokyo listing fell 22 yen or 5.4 per cent to Y385 (£2.03).
Analysts in Tokyo said there were no signs that the deal would spur similar "mega-mergers" in Japan, the world's largest manufacturer of passenger cars. But the deal is likely to push European and US rivals to consider their future plans.
DaimlerChrysler, with joint headquarters in Stuttgart and Michigan, will straddle the automobile market, producing everything from Mercedes-Benz's luxury saloons to the jeeps and heavy trucks built in Detroit.
"The two companies fit together tremendously well as leading firms in their respective markets," Mr Schrempp said in a statement.
Mr Schrempp said the link-up, certain to increase pressures for consolidation across the market, was a merger of equals. But the terms of the deal revealed that Daimler was clearly the senior partner.
Under the pact, Chrysler shareholders will receive 0.547 DaimlerChrysler shares per Chrysler share, giving them 43 per cent of the new company's share capital. Daimler shares will be traded in to the new company at a one-to-one ratio.
The US United Auto Workers Union said it intended to protect the interests of its members in any transaction and would "aggressively pursue" details of the deal.
Daimler said the merger would enhance earnings for shareholders and result in cost savings of 2.5 billion deutschmarks (£1 billion) next year.
Daimler said DaimlerChrysler would be co-led by Mr Schrempp and Chrysler boss Mr Robert Eaton, from Stuttgart and Detroit. But Mr Eaton would leave the new company's board in three years - another element of the deal that suggests German predominance.
Analysts have welcomed the merger plans, saying the two firms are a good fit.
British group, Vickers, has struck a deal with Germany's Volkswagen group to sell its RollsRoyce luxury carmaker to VW for £430 million sterling, Vickers announced yesterday. It had previously agreed to sell the prestigious marque to Germany's BMW group.
