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Monday, January 19, 2004

Mergers continued

Sorry for the delay on my reviewing of the major mergers of automobile manufacturers, I had a busy, but rewarding weekend. I know there are only a few of you who read this site so far, but I'm working on getting the word out, and letting others who are interested in cars know about me. Here are my reviews of the other mergers:

GM/Isuzu: This is possibly the best example of what can go wrong with a merger. Anyone who thinks the Japanese can do no wrong, should take a look at Isuzu. Even in the midst of an SUV boom, no one is buying from this manufacturer. Most of its SUV line is borrowed from GM, and even with that level of platform sharing, the consumer division of the company still loses money. The commercial truck line is doing well, but GM's speciality is marketing to regular people, so the fact that it has been a dismal failure showcases the difficulties companies face when they merge, even if they are in the same industry and targeting the same market niche. Grade F--For complete failure to market SUVs to the American public. It has long been rumored that Isuzu will be leaving the US, which wouldn't surprise me, since even in import heaven LA, you rarely see one.

Ford/Volvo--This is probably the shining example of what a successful merger can become. But even here there are problems with Volvo uncertain of how closely tied it wants to be to Ford, without compromising its design and engineering. The Volvo SUV, a vehicle with many Ford borrowed parts has sold quite well, and Volvo is perhaps the only division of Ford's Premier Automotive Group that is profitable. Volvo was a well run, successful company when Ford bought it, and Ford's meddling has been minimal. The new S40 which shares a platform with the upcoming Euro Focus will be a good predictor of whether cross-marque platform sharing can really work. Grade B+--For the best working merger out there, yet I'm not going to give it an A until I see how the new S40 sells, and to see whether or not there is further conflict between Swedish design, and American meddling.

Ford/Jaguar/Land Rover/Aston Martin--It's been rumored that Jaguar was a company that had not been profitable for decades before being bought out by Ford. Jaguar certainly didn't put much money in new models, and basically rode on the success or failure of the XJ series for many years, with minimal updates. And then Ford bought them, and spent loads updating them. It illustrates the point that whenever an acquisition is made of a brand, billions must be spent to bring that brand up to "snuff". By what I mean is that the brand is usually viewed as inferior from a technological point of view and expensive upgrades are needed in its manufacturing and design. I've read that Jaguar, Land Rover, and Aston Martin were all dramatically behind the times, making use of out dated technology and methods to build their cars, and the result was an enormous investment forced out of Ford. I've also read that Aston Martin NEVER turned a profit in any year of its existence; it was always the plaything of wealthy owners. But every passing year with greater and greater government restrictions in Europe and the US, means making a car is more and more expensive, and to upgrade a vehicle to your standards and platforms is a greater expense then ever. Grade C--For the possibilities that this merger could bring. Platform sharing may yet save money for all the marques involved, but while Aston has done well using Jag parts, and the S-Type has done well being put on the Lincoln LS platform, the X-Type built on the Ford Mondeo platform has had a tougher go at things, showing that platform sharing will only go so far, until you put a luxury brand on the back of a car of more plebian tastes. A FWD Jaguar is just too much for a consumer to buy.

Ford/Mazda: Mazda isn't the lame duck Isuzu is, but it could hardly be called a success. The RX-8 isn't too great of a seller, but the Tribute sells well, and the Ranger clone that Mazda has doesn't hurt either. Ford has had controlling shares of Mazda since the 1970s, and during this time Ford tried to turn Mazda into something it wasn't--a mainstream Japanese car company like Honda or Toyota. The result was a Mazda foray into luxury, the Millenia, and bland sedans that broke no new ground like the 626 and 929. Since then Mazda has embraced being a niche seller of cheap sporty cars. The 6 sold brilliantly in Europe, and well in Japan, but not well in the US because of marketing errors and packaging trim levels improperly. Since then 6 sales have picked up, and the new 3 looks amazing. Aesthetically Mazda might make the best looking Japanese cars, and certainly the sportiest looking and feeling. That sporty image has its limits though--the RX-8 isn't that great of a seller. Grade B--After years of languishing, Mazda seems to be on the right track. Platform sharing hasn't hurt it a bit, and Ford intends on using Mazda designs for their upcoming Ford Futura, the replacement for the Taurus, a hefty request of a small car company.

Renault/Nissan--One man CAN make a difference. Carlos Ghosn, of French/Lebanese descent was sent to take control of a flailing Japanese car company. The result was complete success, and Nissan has come to be the number three car company in Japan. Ghosn will take control of the entire Renault-Nissan conglomerate, and should be successful there too. From what I've read about Ghosn, intensely hard work, and a belief that instead of platform sharing, what should be done with the acquisition of Nissan is running the company more like a Western company. That meant laying off workers, and getting rid of unprofitable divisions. He turned Infiniti around, he made the truck division profitable and expanded it. He continued platform sharing WITHIN Nissan, but not between Nissan and Renault, which would have cost billions more. The result was a turnaround at breathtaking speed. The cars don't have the same fit and finish they used to have, but that wasn't important. What was important was making vehicles people wanted, and updating them regularly. And they did that, with typical European precision. Grade A--This is easily the best merger of the past decade.

You'll notice one thing about all these mergers, the Japanese never initiate them. Not since Toyota took a part of Daihatsu years ago, has there been a Japanese acquisition of a brand. It's probably a smart strategy, they never go places they don't understand. Every car manufacturer has its own culture, its own way of doing things. Learning that way, or teaching them to learn your ways, costs time and money. Toyota could have bought Jaguar and sold them around the world, but instead they went and created Lexus. The result was a success. However, another reason that the Japanese don't buy other car companies, is because they themselves are being bought out. As of this date, there are really only two independent Japanese car companies left in the world: Honda, and Toyota. There's nothing more able to show off your wealth than being able to buy another company. Honda could never afford to do that. But there's never anything riskier than doing that very thing. Ford might have something to say on that subject as well. I missed a few mergers of the smaller kind, but I think you get the jist of what I was trying to say. Mergers rarely pay off, and the industry is littered with failures, many of which continue to this day. It's something that car companies should in general shy away from.

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