Winners and Losers of Automotive Mergers
Not to get the annoying children’s song stuck in your head, but there’s an old saying that “the more we get together, the happier we’ll be.” In business, this is far from a universal truth, but that hasn’t stopped key players in big industries from trying to partner with, or take over, other firms in the playing field.
Recently, rumours have surfaced of Nissan’s supposed intent to take over the beleaguered Mitsubishi Motors firm. This got me interested in automotive mergers, and how good they’ve actually been for all parties involved. Historically, especially recently, mergers have been really hit-or-miss (mostly miss). This doesn’t mean that all mergers are bad, just that they come with their own unique sets of challenges. However, if anyone can pull off a successful merger, it would be Carlos Ghosn and Nissan. After all, they have a pretty impressive track record of being able to work with other manufacturers to benefit both sides.
Winner: Renault-Nissan Alliance
Nissan essentially set the bar for how to form a partnership between two automakers. In 1999, they formed a strategic partnership with Renault, and began sharing parts and architecture with each other. Both automakers played on each other’s strengths in different markets and technologies, and is the textbook example of a successful partnership between automakers. However, neither company bought the other, so it’s not really a takeover or a merger. Still, partnerships are far more likely to occur (Ford and Mazda, for example), and are often a cheaper and less risky way of making both companies better.
Winner: Tata and Jaguar Land Rover
Oddly, while I was writing this article, I looked at the bottom of my teacup, and noticed that it was made by Tata. Oddly enough, this isn’t the only British institution that the Indians have conquered (karmic, I know). In 2008, the massive Indian conglomerate managed to take over the finest remaining vestiges of the British automotive industry. Although the end result wasn’t as good for Tata as they would have hoped thanks to the 2008 financial crisis, the merger ended up being a match made in heaven from the perspective of Jaguar Land Rover. Because Tata isn’t exactly the last word in building luxury cars, they allowed Ian Callum and his crew of designers and engineers to basically do whatever they wanted. As a result, Jaguar Land Rover have been making some of the coolest cars on the road for some time now. This has been especially beneficial to Jaguar, who almost lost their luxury prestige due to Ford, who wanted to build cars under common architecture (cough, cough, X-Type).
You can’t talk about automotive mergers without talking about DaimlerChrysler. That would be like talking about soft drinks without mentioning CocaCola. Everybody thought that the two titans would be life partners when they merged in 1998, what with Mercedes-Benz’s expertise in building luxury cars, Daimler AG’s excellent distribution network, and Chrysler’s lean management strategies. In reality, the marriage of the two automakers resulted in what I will tell the children was a fustercluck. Pretty much everybody in this deal lost: Mercedes suffered crippling quality blows, Chrysler got the raw deal, and infighting between both companies killed any chance of Volkswagen/Audi-esque shared architecture.
Loser: British Leyland
The British automotive industry was already in serious trouble in 1968 when the two largest firms, Leyland Motors and the British Motor Corporation, merged to form British Leyland. Within seven years, the conglomerate lost so much money that they were nationalized by the British government in a vain attempt to stay alive. From then on, it was downhill from there for the British automotive industry. The various brands under the realm of British Leyland ended up being passed around more than a joint at Snoop Dogg’s campfire. Today, only Jaguar, Land Rover, MG and Mini exist. The rest are dead and gone.
There’s no real way of predicting whether or not the potential merger between Nissan and Mitsubishi will be successful. I am not Nostradamus. But I will say that, if anyone can pull off a successful merger, it would be Nissan. The scenario that they are facing is very similar to the Renault scenario: Mitsubishi has a stronger presence in southeast Asia than Nissan does, and it would benefit Nissan to use their relationship with Mitsubishi to strengthen their presence in this market. In addition, Mitsubishi’s market value took a bit of a nosedive after it was discovered that they were inflating fuel economy results. Certainly, Mitsubishi didn’t need any further struggles. Now, it seems that they may be facing the eleventh hour, and a Nissan takeover may just be an offer that they can’t refuse.