A tire industry merger or acquisition can be a stressful experience for many employees. If not managed properly, there can be adverse effects.
There are many reasons why a tire manufacturer may choose to merge or procure a competitor's firm. For example, they may want to eliminate competition, ensuring their business grows. History teaches us that fallout can occur repeatedly.
In the last 30 years, we have seen mergers such as the merger of automotive giants Daimler-Benz and Chrysler in 1998.
In May 2007, Daimler-Benz agreed to sell the Chrysler division of the business for $6 billion, with a reported loss of $1.5B. Along with this loss came the announcement that 13,000 employees would be laid off in mid-February 2007.
Eventually, in 2009, Chrysler filed for bankruptcy.
In the tire industry we have also seen our recent share of major M&A over the past few years.
What happens during a merger?
When two companies in the same industry merge, more often than not, many employees are possibly going to be considered redundant. C-suite executives and consultants call this time "post-merger integration" and consider it to be a period of tension, uncertainty and even chaos.
Workloads inevitably rise along with stress and pressure.
While some employees cope well under pressure, for the vast majority of employees, the added pressures are difficult. For example, it is very likely changes will occur with the company's policies, practices and politics. Some employees may find it challenging to get along with new work colleagues, managers and directors.
When one company acquires another, it generally absorbs the other company. Justifiably, the target company's employees would feel anxious and worry whether they would be let go or moved around.
Their performance could be affected in the time leading up to the acquisition, and loyalties will be stretched.
Organizational upheaval
Typically, people tend to fixate on what they can't control. They worry about things such as who will be made redundant, promoted, reassigned or relocated.
Many mergers and acquisitions within the tire industry served many purposes, including the transfer of knowledge and technology, and therefore don't just influence the companies involved. They can impact the wider industry as well.
One significant reason for a company in the tire industry to acquire another is to obtain technology and the know-how that it didn't previously have because the price of transferring technology within the industry can be costly.
Naturally, there is always some employee uncertainty surrounding a merger or acquisition, and at times this can manifest in detrimental ways, especially if the companies employees disapprove of the transition.
Essentially unhappy employees who may feel threatened or scared might prove less useful than those who feel secure and content.
Generally, mergers and acquisitions boost efficiency. The acquiring company's management team will look at how best to combine the companies. Unfortunately it usually translates to job losses for employees in redundant departments.
Over the past three years, the tire industry has seen a rapid increase in M&A activity, with a few mega-deals that totally change market dynamics. Interest from private equity, institutional investors and strategic acquirers in the tire industry remain high.
While antitrust laws try to limit large monopolies, these laws tend to focus on the effect the merger would have on the consumer, with little or no regard for workers.
In fact, in order to get approval from the Federal Trade Commission, companies must show that the merger will cut company costs, and therefore, lower prices.
Sometimes this specifically means cutting jobs as a means of achieving this. Mergers often create redundancies.
Few companies find a need for two accounting offices or two warehouses within the same geographic area, which leads to closures of the duplicate system and job losses.
It is incumbent upon leadership to create calm within the culture. It's their duty and responsibility to ensure this is addressed consistently at all levels. If not, employees are more likely to leave preemptively.
Leadership should listen to any chatter and act on it, as well as communicate and engage employees regularly, sharing the structure of the new entity and developing a shared culture whenever possible.
Employees, meanwhile, should have an alternate plan if things go south. They should look to demonstrate their value, communicate with their managers and remain a team player, showing the ability to go above and beyond the call of duty.
