World’s carmakers racing to form alliances
The breakdown of two of Detroit’s Big Three is bringing urgency to the scramble among the world’s automakers to forge alliances with former rivals, carve inroads into new markets and shop for well-known brands.
The turmoil has led to a flurry of deals realigning the automotive playing field. Italian automaker Fiat’s bid to become a truly global player by acquiring control of Chrysler and eyeing General Motors Corp.’s European operations is only the most obvious move. There have been several others -- some in the works, others only rumored -- spanning Europe, Asia and North America.
The goal for automakers, analysts say, is to survive the worst climate for vehicle sales in decades by getting bigger and broader. To do that, they’re looking to either acquire distribution networks in new markets for their own cars or bid for the brands that have come up for sale as a result of Chrysler’s and GM’s struggles.
But it’s not clear how different your local auto-dealer row will look a decade from now.
“The GM and Chrysler restructurings are going to trigger a major shift in the way the automaker landscape looks over the next five to 10 years,” said George Peterson, president of Tustin consulting firm AutoPacific. “There could be so many permutations and combinations that you can’t really predict what will happen.”
Chrysler, which also sells the Dodge and Jeep brands, filed for bankruptcy protection April 30, the same day it struck an alliance with Fiat that ultimately could give the Italian company a controlling stake in the onetime American auto stalwart. GM is trying to avoid bankruptcy in part by unloading its Saturn and Hummer brands in the U.S., its Opel division in Europe and its Swedish car marque Saab. It’s also killing its Pontiac brand.
Striking the deal for Chrysler will give Fiat, which fled the U.S. market in the 1980s, an instant dealer network to sell small, fuel-efficient cars built in North America and based on models such as the Fiat 500, popular in Europe. The Italian company is also in talks with GM to take over Opel and has expressed interest in Saab.
Completing all those deals could vault Fiat into the top five among the world’s auto companies in terms of sales. (It currently ranks 11th.) But others are angling for Opel -- Canadian auto parts maker Magna International Inc., for instance -- and reports have surfaced that Chinese automaker Geely Automobile Holdings Ltd. is interested in Saab. Geely denied that report.
Other reports have Penske Automotive Group Inc., the Bloomfield Hills, Mich., dealership chain, in talks with GM about acquiring Saturn’s distribution network. GM said Monday that it was in talks with two bidders for Hummer.
Not everyone is in the hunt. Renault-Nissan, the Franco-Japanese alliance that some point to as a model for global auto hookups, said this week that it had no plans to bid on Chrysler’s or GM’s assets.
Germany’s Volkswagen, the world’s third-largest automaker behind GM and Toyota Motor Corp., also is sitting this one out -- for now. VW already is a mini-U.N. of transportation, fielding an international portfolio of nameplates that includes Audi in Germany, Seat in Spain, Lamborghini in Italy, Skoda in the Czech Republic, Bugatti in France and Bentley in Britain. And it is in the process of merging with its majority shareholder, German sports-car maker Porsche.
Rather than buy more brands, VW appears intent on shoring up its presence in the United States, where it has a paltry 2% market share.
The globalization gambit is nothing new, of course. Auto companies have been forging cross-border alliances in recent years to share technology, which has become increasingly complex and expensive to develop, notes Ron Pinelli, president of AutoData Ltd., which compiles industry sales figures.
Some foreign affairs have foundered. The marriage of Chrysler and Germany’s Daimler (parent of Mercedes-Benz) famously failed, as did a dalliance between GM and Fiat earlier in the decade.
And Ford Motor Co.’s decision to give up on collecting foreign auto marques kicked off the worldwide auto swap meet in 2007, when it began dismantling its Irvine-based stable of foreign luxury brands, eventually selling off Aston Martin, Jaguar and Land Rover. The last piece, Swedish automaker Volvo, is on the auction block.
Ford is concentrating on simplifying its vehicle lineup and using some of its popular European models, such as the Fiesta and the Euro-version of the Focus, as the basis for small cars that it hopes will be profitable sellers in America.
Other liaisons have been more successful. Paris-based PSA Peugeot Citroen has teamed with Japan’s Mitsubishi Motors Corp. to build a PSA-badged crossover SUV.
The question remains how markedly the reshuffling will alter the global auto market.
Barring a complete collapse of GM, the upper ranks of the world’s automakers aren’t likely to change significantly in the near future, analyst say, despite repeated predictions that Chinese and Indian cars are about to flood global markets. Fiat, if it succeeds in its multiple acquisitions, might be the only car company to dramatically raise its international profile.
In the meantime, South Korean automaker Hyundai Motor Co. -- which also controls the Kia brand -- continues to solidify its position in the United States, still the world’s most important car market. Based on sales last year, Hyundai-Kia ranks No. 5 globally and No. 7 in the U.S.
And Toyota, despite recent struggles, isn’t likely to be displaced by Fiat any time soon.
There are more than 100 Chinese auto companies, and it’s unclear which ultimately will rise to true prominence.
In the coming years, “you’ll see new badges, you’ll see new companies from China and India,” said Dan Cheng, head of consultant A.T. Kearney’s North American auto practice. “But they’ll be niche players.
“I would not expect to see 12 different full-line [automakers] offering a full range of vehicles.”
--
