The 'Devil's Pact' that birthed the world's most famous car brand

History · Published 9 October 2026 Swipe more like this →

In short: Daimler-Motoren-Gesellschaft didn't start as a luxury car maker. It was an engineering firm struggling with low sales and a lack of profit, forced into a corporate merger by financiers who barely believed in cars at all.

Founded in 1890 by Gottlieb Daimler and Wilhelm Maybach, Daimler-Motoren-Gesellschaft (DMG) initially focused on small, high-speed internal combustion engines. While the inventors were obsessed with revolutionizing land, sea, and air travel, their early business was precarious. Sales were sluggish, and licensing agreements failed to yield significant profits. To survive, they entered a 1890 agreement with industrialists Max Von Duttenhofer, Wilhelm Lorenz, and banker Kilian von Steiner. Certain scholars describe this shift into a public entity as a "devil's pact", given that the creators found it difficult to align their goals with those of the investors.

The financiers were skeptical of automobiles, preferring to expand the stationary engine business which was selling well. They even considered merging with Otto's Deutz-AG. Daimler and Maybach were so frustrated by this lack of support that they briefly left DMG entirely. It took a persistent intervention from Daimler's friend, Frederick Simms, in 1896 to bring the inventors back into the fold. Once reinstated, they began producing the first true automobiles—designed from the ground up rather than just engines fitted into carriages.

The turning point came through a collaboration with Austrian merchant Emil Jellinek. Seeking a safer, faster car after a tragic accident involving a Daimler racer, Jellinek commissioned Maybach to design a modern vehicle. This led to the 1902 Mercedes models. The success of the Mercedes 60 was so profound that DMG's workforce nearly tripled in just one year, growing from 821 employees in 1903 to 2,200 in 1904. This momentum eventually led to the 1926 merger with Benz & Cie., forming the foundation of the modern Mercedes-Benz Group.

The company's resilience was tested by a catastrophic fire on June 10, 1903, which destroyed their Cannstatt factory and 93 finished Mercedes cars. In response, DMG established one of the first worker insurance schemes (a Relief Fund) and provided bread rations to displaced staff. These early industrial practices, combined with rapid mechanization that boosted productivity from 0.7 to 10 cars per worker by 1913, secured their position as a global engineering powerhouse.

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