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The automobile manufacturers are doomed to grow?


While the industry has just gone through the worst crisis of its history, the conditions seem ripe for a new wave of mergers in the automobile. PSA and Mitsbushi could also launch the movement. But the specter of repeated failures remains.

Carlos Ghosn was not wrong. The crisis may well be accompanied by further consolidations in the automotive sector. With PSA in pole position. If for the moment nothing is decided yet, the French manufacturer is in talks very advanced, with Mitsubishi to incorporate a portion of its capital. Before him, the approximation Fiat – Chrysler or Tata Motors – Jaguar had already launched the movement.

Grow at all costs

Last May, Sergio Marchionne diagnosed a manufacturer could now go it alone if it does not produce 5 to 6 million vehicles per year. For many manufacturers, is the effect size, which will thus the difference. From today, it costs between 1 and 2 billion euros to develop a new model, while the life cycle of a car was shortened and averages about 5 years. "Knowing that the development costs of 1 billion euro platform, a distribution of at least one million vehicles a range is imperative to be profitable. Since the consolidation will be an asset to be present on all ranges "Said Francois Pierre Arth, analyst at Groupama. If the finding does not date from yesterday, the issue of overcapacity in Europe, estimated between 25 and 30% according to analysts, it also advocates for consolidation."This would indeed manufacturers to streamline their production tools and therefore a return on their investment"Adds Francois Pierre Arth. But also to penetrate more easily in countries emerging new growth for manufacturers."China is such a very atypical market that is virtually impossible to penetrate without the aid of local partners", Michel said the Freyssenet Gerpisa. Partnering with a company that has expertise geographic region win is a definite asset, even a necessity. While European markets are almost mature – the United States counted 885 vehicles per 1,000 people – India and China are almost entirely will power – they have respectively 14 and 34 vehicles per 1000 inhabitants.

Many future investments

Furthermore, Consumer expectations are changing. Increasingly they want small cars with low energy consumption. "But if technological change is accelerating, particularly because of the crisis, no visibility on what will be the flagship technology of the next 30 years. No manufacturer today has the means to develop these technologies. Hence the importance of combining strengths, particularly in terms of investment" Says Lawrence of Places, Partner and Head of Automotive at KPMG.

But if the crisis, the most important sector is known, has accelerated this trend of consolidation, it has also weakened many manufacturers. Heavily indebted, they are for the most part, more financial resources to such repurchases. Also, for the specialist Michel Freyssenent "This wave of consolidation, if necessary, will depend on health market in 2010 When the effect of scrap premiums put in place across Europe will fade".

The specter of failed mergers

And then the merger is a dangerous exercise, sometimes traumatic. Failures operations Daimler-Chrysler, Ford, Mazda, BMW-Rover GM-Fiat permanently etched into the memory. Some see it as difficult to work in this area characterized by a strong corporate culture. "If Nissan and Renault alliance has worked perhaps because it was not a merger, and probably also because Renault, while taking control of the whole, found in this Strategic Partnership the appropriate level of cooperation "Said Michel Freyssenet. For experts, a successful merger implies a political vehicle near strategies common profits, and organizations are able to cooperate.

The car also remains an area highly sensitive politically, where state interference is common and may influence policy decisions. Evidenced by recovering very confrontational Opel in Germany. "The slow process industry has perhaps not always led the leaders to make the right decisions in terms of strategic repositioning"Analysis meanwhile Francois Pierre Arth. On average it takes 7 years to go from concept to completion of a product. After ten years of strategic partnership, Nissan and Renault are just able to present to the market these synergies. Precisely because these synergies are slow to emerge as manufacturers have sought other means of growth.

Growth and occasional alliances

In Japan, they preferred to focus on internal growth. Honda 2th Japanese manufacturer and 4th Global automotive brand, has always refused to large acquisitions. "Manufacturers who have an interest in external growth are those whose profits are based on economies of scale, like the model created by GM in the 20s. And which are not yet sufficiently established in emerging countries"Said Michel Freyssenet. Precisely those whose financial capabilities have been greatly reduced with the crisis. Just like Fiat, Ford, or PSA, which never succeeded as Toyota or Volskswagen to be exported with simple ad hoc alliances.

More flexible, these alliances remain a feature of this area where it is possible to develop a common platform vehicles in the same range where to make bulk orders from the same suppliers. "Examples of this kind are numerous in the image of the association PSA-Fiat for the manufacture of minivan, or alliance BMW – PSA engines, and were generally very well"Said Francois Pierre-Arth. But it also has its limits."These alliances allow for economies of scale, but if the market does not increase significantly when there remains only the external growth and emerging markets to be profitable"Concludes Michel Freyssenet.

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