This week at the 2015 North American International Auto Show in Detroit, General Motors North American President Alan Batey said he didn’t feel GM needed to merge with another company to cut production costs, instead preferring to collaborate with companies that have shared goals.
“We collaborate if we find partners with similar needs and requirements,” Batey told WardsAuto. “We have scale. We are truly global. We’re able to think globally. In the future, I don’t see that changing.” Look no further than GM’s deal with Honda over hydrogen fuel cell development, for example.
This is in contrast to the opinion of CEO of FCA US Sergio Marchionne, who feels that consolidation is unavoidable in an industry that is capital-intensive, adding that investors tend to undervalue auto stocks: “The cost of executing (product launches) is in excess of what a mature industry is able to afford. Look at how capital markets value auto stocks. We are assigned incredibly poor valuation.”
Batey feels that most “true mergers” over the past 20 years have been difficult to execute, eventually unravelling. Instead, GM will likely continue the path of collaboration, as it does with Ford on transmissions for America, and PSA Peugeot Citroen on European vehicle platforms.
“Rather than mergers, it’s about collaboration around specific technologies, components or requirements,” he said.
Comments
I am firmly of the opinion there are far too many automakers throughout the world. Further complicating this is China’s strong desires to become a global vehicle producer. It has become apparant that the sandpit is full as global markets are already saturated with multiple makes and models.
As a result, mergers, takeovers or bankruptcy will very likely eventuate over the next 5 – 10 years (rationalisation). This is particularly poignant by the parlours state of western economies – most countries are/nearly bankrupt i.e. The U.S. will never pay back their national debt.
I love that the world has so many automakers. It reminds me of early 20th century, when small firms prospered across the US and Europe.
The West has already gone through consolidation–only PSA, Mazda and Suzuki are really up for grabs. I leave out FCA because it’s still a basket case with billions dumped into Alfa!
GM would be wise to acquire Mazda, merge it with Opel, and for a few billion create a global division with unlimited potential. (Chevy, like Hyundai would benefits from inter-divisional competition plus market share would instantly grow).
GM would also be wise to sell technology to smaller firms like Honda. Taking on such a role would reduce GMs R&D budget plus give the company tremendous control over the industry.
Outside of these steps, GM only needs to produce great product and collect product.
Well this is a very complex issue here and hard to completely address in a few sentences. We do have too many MFG now globally. Many have sprung up to take advantage of the large Chinese market.
But like in the 1920’s and 30’s many will fail with changes in the economies.
As for mergers and partnerships the best way to explain it is this.
If you are large and you do not want to carry the added burden of more models and more product lines strategic alliances are great such as GM has done with Ford. GM does most of the work but in the end lets Ford pay for most of the work and share in the cost. It is a part that is not going to make or break either company as so few people really do not identify with transmission and who built them anymore. The GM and BMW deal was also the same but in the case of BMW it saved them money as they can not do this on their own being a smaller company. They need a dance partner.
As you will see some have tried the merger thing and things are tough as in with Chrysler Fiat as they are still cash poor. They are now looking to spin off Ferrari for more money and even talks of merging with VW.
On the other hand you have companies like GM and Ford that will work with others to save cost and not add the extra burden of more product line and issues that come with adding more company than you really need.
VW right now is making it work with the many mergers but in time this could easily catch up to them.
The key is right now GM can work with people Like BMW, Honda and other smaller companies that want to remain independent to share cost. The ability of GM’s Tech center is something not lost on many other automakers. GM can do it faster and cheaper than they can and they can focus more on their cars and still remain independent.
Benz also is much like GM where they do not need to merge but they can work with others if they choose but at this tim that is limited as they do not need the help yet.
Right now for a company like GM the last thing they need is a bunch of smaller companies that they have to deal with. They have enough on their plates now. But they should use their technical knowledge as often as they can to make money and to share development cost. They have a strong advantage here the could really help them. It also would move many of their projects along much faster and bring new things to the market much faster.
The bottom line is if you have resources you work with a partner to save cost. If you have limited cash and resources like Segio then you must look to merge as you can not afford to buy in on shared development. The plain fact is Sergio has so little to bring to the table as Fiat is cash strapped and limited in technology. Can buy it with no money and can’t share it if you just don’t have the technology advantage.