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Graham Robson


Under intense financial pressure in the aftermath of the First World War, Daimler merged with Benz in 1926, opening the road first to survival, then success as the renowned global company that today produces the Mercedes-Benz automobile.

MONUMENTAL MERGER – 1926

Article Graham Robson
Images Daimler Archives

 
Under intense financial pressure in the aftermath of the First World War, Daimler merged with Benz in 1926, opening the road first to survival, then success as the renowned global company that today produces the Mercedes-Benz automobile
 
Mercedes-Benz … ah, yes – probably the most famous brand among motor vehicles in the world. Even so, it is worth recalling that the parent company – the motorcar even – was not born until 1926 when Daimler-Benz AG came into existence. It seems to me, therefore, that now is the right time to honor the approach of its 90th anniversary.

It’s quite surprising that many people don’t remember that, even before the beginning of the 20th century, there used to be separate German businesses producing Daimler and Benz cars – nor, indeed, that the Mercedes brand was originally just a different type of Daimler.

As the new century flexed its muscles, those were the days in which the German motor industry – especially compared with the United States and Great Britain motor-vehicle industries – was still pitifully small. Opel was still tiny and Audi, BMW, Volkswagen and Porsche did not yet exist, so Germany’s market was strictly limited. Although big strides were made in the 1910s – particularly regarding the manufacture of excellent aero engines for military use – it was mainly motor-racing victories that brought the Benz and Mercedes marques to the attention of the wider world. Before World War I, for instance, Benz never produced more than 2,000 vehicles in a year. In contrast, and on the war’s eve, Daimler was building the immense Sindelfingen factory just a few miles southwest of Stuttgart to produce Daimler trucks and Mercedes cars, though the factory’s immediate use would be for the production of aircraft and aircraft engines.

By the end of the Great War – which slaughtered the flower of so many nations – Germany had been brought to its knees, close to a revolution, and plunged into the financial penury that would shape the 1920s. The peace treaty imposed on the German nation by the United States and other allied powers meant that war reparations would have to be paid, and that any prosperity coming from postwar rebuilding would be postponed. In addition, antipathy toward Germany effectively curtailed any efforts to sell its cars in other countries.

From 1919, therefore, Benz and Daimler had to attempt selling their mid-priced and expensive cars into the same contracted marketplace, and clearly did not enjoy the prospects. It came to look inevitable that the two companies would either have to join forces, or their debilitating battle for sales would eventually result in one of them being forced out of business.

The day of decision might have been postponed for a while, but the whirlwind of financial inflation – caused by Germany’s awful postwar situation – threatened to consume the nation in 1923 and destroy everyone’s hope for the future. Of the two companies, Daimler was the most financially stable, though it was very difficult to plan ahead in a country where a workman had to bring a suitcase to work – or wheelbarrow, cynics pointed out – to haul away a mountain of almost worthless paper money. In a situation where the price of goods increased daily and often in increasingly larger increments, inflation was measured in the millions or even hundreds of millions in percentage growth – if it could be accurately measured at all.

The national government began taking control, refusing to continue payment reparations – seen as an almost automatic precursor to the inevitability of WWII – and introduced a new currency, the Reichsmark. For Germany’s most prestigious carmakers, there was an impetus toward consolidation.

This is the moment when one might sit back, and wonder: Was there any alternative to merging these two companies? Probably not in Germany itself, where the two brands were already pre-eminent in the appropriate market category. But as a passing thought, Adler might have been considered, while Horch of Zwickau – where Gottlieb Daimler’s son Paul became chief engineer in 1923 – was a possibility. But certainly not Maybach, which wasn’t founded until 1921 and even then concentrated on making much more expensive automobiles. Similarly, Steyr of Austria was still too new, for although it had been a thriving arms-production business, it only started building cars in 1920. The nature of the alternatives, I believe, illustrates that too many hopefuls were searching for the same sort of business, and the need to combine resources was becoming more urgent.

Even before the financial tornado struck, it seems that Benz supervisory board member Carl Jahr – and others before him – suggested a merger in 1919, but his wise counsel was swept aside at that time. Instead, Benz concentrated on building improved versions of its pre-1914 cars, including the small 10/30, the larger 11/40 and the 16/50 models – the last being a big and sporty car with a 6-cylinder engine, one of the most luxurious cars of its day.

Daimler on the other hand, moved up-market, especially by introducing supercharged Mercedes cars in the early 1920s, including the 6/25/40 and 10/40/65 of 1921. There was also the 6-cylinder 28/95HP model, originally designed in 1914, but now to be sold as a sports road car with a supercharger added for motor racing in 1922.

Even so, the numbers of Mercedes and Benz cars sold and the profits accrued – if any – could not be increased, and in view of the German motor industry’s perilous state, the situation was not unexpected. By the 1920s, there were no fewer than 86 motor manufacturers in the country producing 144 different models. Every production plant was underused – some yawningly near empty – and it was suggested that one single factory complex, using modern manufacturing methods and machinery, could supply the entire German market. In 1923, Benz produced only 3,624 vehicles and Mercedes, 2,287 – nevertheless representing a total market share of 12.2 percent.

Government, still interfering precipitously to attack the financial crisis, applied a 15 percent luxury tax to the price of cars, which naturally reduced demand even further. This tax was later progressively reduced to 7.5 percent. As to supplying cars for export, there was no way this could be considered before Germany’s financial woes were overcome.
So, what could be done? In the end, the idea of a closer association between Daimler and Benz began to look desirable. If taken to the ultimate limit though, this would be a major move – in modern terms, the equivalent of merging Mercedes-Benz with BMW or Toyota with Nissan. Even so, in 1923 the two boards bit the bullet and began officially talking with each other for the first time. Not only that, but teams of engineers from each company began working together, sub rosa, to begin moving forward with new cooperative designs.

One could see this might lead to factory closures, job losses and certain models being dropped – not to mention the bruised egos that would then have to work together in Stuttgart or at Mannheim. Nonetheless, by May 1924, the deed was done – a written agreement signed between the two companies – and according to the news that was circulated: “The aim is to standardize design and production, while unifying purchasing, sales and advertising. ...”

This was the original “Agreement of Mutual Intent,” which did not promise an imminent merger, but which certainly made that a logical development in the relatively near future. Banker Emil Georg von Stauss – a Daimler board member since 1920 – carried out much of the legal and financial maneuvering and it was Benz’s Wilhelm Kissel who set about turning all the honeyed words into fact.

In the meantime, more exciting technical advances were forecast following the recent arrival of Ferdinand Porsche as technical director. It was no surprise, therefore, to see that the new Board of Management included three individuals from each concern, three of which were distinguished engineers – Porsche himself, Fritz Nallinger of Daimler and Hans Nibel from Benz. Porsche, of course, would move on in 1928, while Nallinger and Nibel were destined to lead a quite remarkable team for the next several decades.

So far, so good, but both before and after a formal merger would take place, the major assembly factories of Benz in Mannheim and Mercedes in downtown Stuttgart remained in operation. It would be at least 10 years before car assembly at Mannheim ceased – in favor of truck and bus manufacture – while a big and modern Mercedes factory at Sindelfingen was progressively enlarged.

There was much to do, including rationalizing every model, before a truly formal merger could take place; that big day arrived 29 June 1926 when Daimler-Benz Aktiengesellschaft came into existence. The mid-term objective was to totally rebuild the business and, as I am sure every Mercedes-Benz follower realizes, this was achieved later in the 1930s.
This was when the new company – christened Daimler-Benz AG – burnished its re-created image, particularly with the appearance of a combined Mercedes-Benz trademark consisting of the three-pointed star, which first appeared on Mercedes cars in 1909, and the laurel wreath, which had earlier symbolized Benz automobiles and trucks.

Once the merger was announced and formalized, the first in a number of cooperative new designs appeared. The extrovert Porsche had already produced the first of his magnificent 6-cylinder supercharged sporting cars – and by any standard, seen as indulgencies – but a flood of more carefully planned family cars soon followed. Otherwise, when the full merger was announced, Benz was still manufacturing the naturally aspirated 10/30 and 16/50 models while Daimler continued to build supercharged 6/25/40 and 10/40/65 Mercedes machines.

Then came two new ranges of mundane middle-class touring machines – the cars that DBAG anxiously hoped would produce the real profits and real cash flow. It was immediately clear that both were evolutions of Benz cars rather than those of Mercedes – and because they were launched merely three months after the formalized merger, they had clearly been designed well beforehand.

These new cars had 6-cylinder engines and, to signify where they were to be built, there would be a 2-liter “Stuttgart 200,” and a 3.1-liter “Mannheim,” both with new channel-section chassis frames and full ranges of rather severe and upright styles. Although neither model looked exciting (and, to be honest, that is exactly what the new management intended), they certainly laid the appropriate foundation and sold steadily for the rest of the 1920s. However, except for the progressive improvement and enlargement of the K, S, SS and SSK sports models, there was little excitement in the late 1920s.

There is, of course, a very happy ending to this story. Without a successful merger, it seems certain that neither brand would have survived the difficult economic conditions of the early 1920s and the famous Mercedes-Benz marque would never have been born. But it was certainly a time when the company gained ground and its reputation, improved and enhanced. And we can all be delighted about that.
 
Sidebars
 
Benz: The Pioneers
It’s generally agreed that Benz built the world’s first gasoline-powered 3-wheeler motor vehicle – the Tricycle of 1885. Production of 4-wheel machines began at Mannheim in 1891 and the company steadily expanded its annual sales thereafter. Except for an inspection of the rival Mercedes models on public occasions, there was to be no technical or commercial link between the two companies until the early 1920s.
 
Daimler: A Thumbnail History
The original gasoline-powered Daimler was a crude motor bicycle, introduced in 1885, but 4-wheel devices soon followed and Daimler centered production at Bad Cannstatt, near downtown Stuttgart. The early cars were also license-built in several other countries, but it was not until 1901 that the Mercedes name was introduced as part of a marketing agreement with Austrian race driver and automobile dealer Emil Jellinek in 1900.
 
Mercedes: Building a New Brand
 
Jellinek urged Daimler to start building a new type of car – one with a lowered chassis, longer wheelbase and a more powerful engine – and in return agreed to purchase a large number of the new models. Jellinek suggested for a name for those cars – “Mercedes” – his own daughter’s namesake, and the rest is history. This new-style car – many call it the world’s first true sports car – was such a technical and marketing success that the parent brand name of Daimler was withdrawn in 1902.
 
ABOVE LEFT: After the 1926 merger of Daimler and Benz, newly appointed Technical Director Hans Nibel developed the Mercedes-Benz Type 10/50 Stuttgart 260. Sold as both sedan and cabriolet from 1929 to 1934, it was powered by a side-valve six-cylinder 2.6-liter engine producing 49 horsepower at 3,400 rpm.  Seen here in the Swabian hills near its namesake city, the Stuttgart had a top speed of 56 mph and was equipped with a 4-speed manual transmission, semi-elliptic leaf springs and mechanical brakes at all four wheels.
 
FROM LEFT: Hans Nibel, at the wheel of a 20/35-PS Benz during the 1909 Prince Heinrich Tour, was technical director of Benz during the merger. He would form a remarkable partnership with his counterpart at Daimler, Fritz Nallinger, here in a Mercedes-Benz Type 630, Model K Sport, built 1924 to 1929. Aerial view of the Daimler Sindelfingen plant, 1924. BACKGROUND IMAGE: A parade of Mercedes-Benz passenger vehicles leaves the Sindelfingen works for the International Automobile Show in Berlin, 1934.
 
FROM LEFT: Chassis assembly line in the former Benz factory in Mannheim, here producing the Mercedes-Benz N¸rburg model, circa 1929. Benz Type 16/50 HP sports car, 1925. Renowned racing driver Rudolf Caracciola with his Mercedes-Benz Nürburg 460 K (short), Cabriolet C, 1930. Developed under Ferdinand Porsche and propelled by a 4.6-liter 8-cylinder engine, the Nürburg 460 received its name after covering 12,500 miles in 13 days of endurance testing at the Nürburgring.