Posts Tagged ‘car’

Will the Global Auto Industry Consolidate?

August 12th, 2011

The global automotive industry is going through some big changes with some manufacturers merging while others are forging important alliances.

Getting Together

In 2009, Fiat acquired a stake in bankrupt Chrysler while Toyota continues to hold shares of Daihatsu, Subaru and Mazda. Recently, Daimler agreed to form a small car alliance with Renault-Nissan, itself a Franco-Nippon agreement hatched in 1999. Spyker now owns Saab while China’s Geely Automotive is acquiring Volvo.

What on earth is going on with the car industry?

Consolidation is the word as rapidly shifting consumer demand, stressed out economies and too much capacity weigh in. And don’t think for a moment that this trend will abate. Likely, we’ll be hearing of additional mergers, acquisitions and alliances formed in a bid to help companies profit from these changes.

Marchionne Opines

According to Sergio Marchionne, chief executive for the Fiat Group and Chrysler Group, LLC, automakers need to produce approximately 5.5 million cars annually in order to be profitable. That scale of operation is currently reached by a handful of companies right now, but as mentioned by The Auto Writer in December 2008, a few changes here or there and you’ll have the consolidation Marchionne has envisioned taking place.

Not all consolidations or collaborations work out according to plan. Most recently, the Daimler-Chrysler hook up was an abject failure not the merger or acquisition originally conceived in 1998.

Still, that didn’t stop Daimler from pursuing a small car alliance with Renault-Nissan, with each company taking token stakes in each other to seal the deal. Daimler was burned once so don’t expect this agreement to go beyond small car component sharing with perhaps some commercial vehicles thrown in.

Emerging Markets

All across Europe, there are too many manufacturing plants to justify production. The strongest growth markets are China, India and Brazil and those are the places where capacity is being expanded. One only has to look at the major players operating in each country to realize that the stakes are high. Meanwhile, contraction of sorts is taking place in Europe and North America which means that some companies are shrinking, making it more difficult for them to go it alone.

One likely scenario is this one: as emerging markets continue to fuel demand, local manufacturers will continue to look abroad for alliances. Just as Geely snapped up Volvo, expect other Chinese companies to do the same. For many years, China’s auto industry has consisted of local-foreign alliances, perhaps a telling sign of what the rest of the world may soon see.

Global Auto Trends Heading Your Way

August 11th, 2011

ntil recently, the U.S. auto market was insulated from what took place in much of the rest of the world. Passenger vehicles built in North America, particularly in Canada and the United States, were often different from what car manufacturers built in Europe, Asia, South America and elsewhere.

Auto Trends

Beginning with the global economic crisis of 2008, automakers began to take stock in what they had to offer and how they could survive for the long term. General Motors and Chrysler went bankrupt, restructured and are far different companies than they were just a few years ago. Ford decided to internationalize its fleet, building and selling similar models in all markets under its “One Ford” plan.

The changes realized in the past few years portend to even greater movement in the coming months and years. We’re tracking all of the latest auto trends and our forecast includes the following notables:

Global Mergers — China is the new top dog in automotive world, with consumers there buying more cars annually than in the U.S., the former global leader. China’s automotive manufacturing industry is still young and no cars are currently built in China and sold in the U.S. Expect that to change as Chinese companies snap up foreign manufacturers or at least expand their current manufacturing relationships in order to get Chinese products throughout the world.

More Hybrids — Electric vehicles are getting plenty of press, but these cars are not notable sellers. Hybrids, which have gone through more than a decade of refinement, will grow in leaps and bounds as manufacturers figure out ways to cut and share costs, driving down the price of these vehicles within reach of most buyers. Look for hybrids to appear in a greater variety of vehicles and in non-traditional forms such as with Buick’s eAssist technology, offering “partial” but effective hybridization.

Diesel Effectiveness — The Ford Motor Company has figured out a way to squeeze even more mileage out of its diesel engines, promising that its European Ford Focus will get 80 mpg on the highway when it goes on sale in 2012. That vehicle will set off a race by manufacturers to upgrade technology, producing new diesels offering rock solid performance, excellent fuel efficiency and very few pollutants. Americans will finally embrace diesels by 2015, taking a significant chunk of business away from gas only models.

Advancing Technology – We take for granted Bluetooth, collision avoidance systems and traction control, features not available in most cars until recently. The technology march continues and includes significant auto trends such as driverless cars, full mobile WI-FI and renewable features including seats, dashboards and floors. Indeed, most cars built in 2020 will be nearly fully recyclable — not because of government mandate, but because manufacturers realize the importance of reducing what goes to landfills.

Global economic concerns will loom large in the years ahead as earthquakes in diverse places, political unrest, limited resources and environmental concerns weigh in. If not outright mergers, many companies will work together, sharing platforms, engines, transmissions and important components to keep costs down and to keep each company afloat.