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6:21 AM
rin
Here are a couple of good articles....
Daimler-Renault-Nissan deal puts spotlight on scale
(Reuters) - The link-up between Renault-Nissan and Daimler (DAIGn.DE) shows the urgent need for scale in an industry still reeling from a collapse in demand and gearing up for massive investment in green-car technology.
That will mean renewed scrutiny of growth strategies by the likes of Japan's Mitsubishi Motors (7211.T), France's PSA Peugeot Citroen (PEUP.PA), Germany's BMW (BMWG.DE) and even Italy's Fiat (FIA.MI), analysts say.
"We are going to see some significant mergers, acquisitions, restructurings and spinoffs," said David Cole, director of the Center of Automotive Research in Ann Arbor, Michigan.
Just three years ago, Daimler moved to unwind one of the least successful deals in the history of the auto industry, dumping its Chrysler unit for a $30 billion loss.
Now, the Mercedes-maker has decided a more limited deal with the Renault-Nissan (RENA.PA) (7201.T) alliance headed by Carlos Ghosn will give it the small-car technology and scope it needs in the face of tighter emissions and fuel economy standards.
In return, Renault-Nissan will get access to Daimler's engines for Nissan's luxury Infiniti brand and the opportunity to share vehicle platforms and bring down costs at a time when its own alliance has been seen as sputtering.
Cole said the deal could be a blueprint for future collaboration in a high-cost area: developing the engine, transmission and now battery-drive systems that power vehicles.
"The historic view is that the powertrain defines the personality of the vehicle in the eyes of consumers. That's probably not true anymore," he said.
FIAT TO FOLLOW?
For smaller players such as Japan's Suzuki Motor Corp (7269.T), developing technologies such as a complex hybrid system on its own was not an option, which is why it aligned itself with Volkswagen AG (VOWG_p.DE) late last year.
Similarly, last month, Mazda Motor (7261.T) struck a deal to buy hybrid technology from market-leader Toyota Motor (7203.T).
Elsewhere, Italy's Fiat last year teamed up with bankrupt Chrysler, and analysts said it could look for further partners in Asia after having formed joint ventures with Tata Motors Ltd (TAMO.BO) in India and others in China and Russia.
"I could easily see Fiat shopping for another alliance in Asia," said Logan Robinson, a professor at the University of Detroit Mercy School of Law and former auto executive.
China is likely to be a key. Its emergence as the world's largest car market has been a boon to sales for U.S., European and Japanese car makers, but it has also created competitors such as Geely (0175.HK) -- fresh off its acquisition of Sweden's Volvo -- with deep pockets and global ambitions.
Still, after the numerous false starts over the past two decades -- most notably with the spectacular break-up of DaimlerChrysler after nine years -- some analysts remain skeptical that alliances can deliver as promised.
"I'm hoping that others don't go down this path" taken by Renault-Nissan and Daimler, said Erich Merkle, analyst at Autoconomy.com. "If you look at the history of alliances...they have a very checkered past. Most of them haven't worked.
While financial markets tend to price progress in quarters, it can take four years or longer to capture the full cost savings from collaboration in developing a new vehicle even if everything goes as planned, analysts say.
TOUGH EXECUTION
Even Nissan and Renault, lauded as a rare example of an alliance that has worked, has had a mediocre start.
After a decade together, the partners admitted last year to needing deeper integration, putting in place a more formal structure to squeeze out synergies that engineers had resisted. The partnership saved near-bankrupt Nissan from demise, but Renault has fallen into a slump Ghosn has struggled to reverse.
That could be a lesson for Fiat CEO Sergio Marchionne, who faces the daunting task of integrating Chrysler after taking a 20 percent stake in the weakest U.S. carmaker out of a U.S.-government funded bankruptcy.
Marchionne has said that automakers need global sales of at least 6 million cars and trucks to be competitive on cost. The Daimler-Renault-Nissan alliance would just clear that hurdle with global sales of just over 6 million units.
Fiat-Chrysler remains short of the mark, closer to 4.5 million units. But size alone is no guarantee of success.
General Motors Co GM.UL is a case in point. After its own 2009 bankruptcy, GM, like crosstown rival Ford Motor Co (F.N), is struggling bring the focus back to its core brands, led by Chevy.
Even Toyota, the world's top automaker, has proven that the bigger the ship, the tougher it is to steer. Rather than seek tie-ups, Toyota has said it would slim down its vehicle line-up to become more nimble and efficient.
FLYING SOLO
Having failed to agree terms on a capital alliance with Frances PSA, Japan's Mitsubishi Motors is seen by analysts in need of a partner to offset the cost of developing advanced technologies in areas like battery-powered cars.
But Mitsubishi President Osamu Masuko told Reuters last month that equity-based tie-ups were no guarantee of success.
"We have to remember that a capital alliance is no panacea," Masuko said. "If it were, then why didn't it work for us with Chrysler? Or with Daimler? What happened with all the capital ties that General Motors had?"
Honda Motor Co (7267.T) also believes it can find new efficiencies in-house will as Japan's second-biggest automaker continues to shun alliances, much like BMW.
"The key now is figuring out how to efficiently develop and produce cars," Honda executive Fumihiko Ike said last month. "And if the company becomes too big, efficiencies will also fail."
BMW, meanwhile, has project-based ties, including with PSA in small engines, and expects its cooperation on sourcing with Daimler will continue, notwithstanding the latter's deal with Renault and Nissan.
"We don't want to give up our independence," BMW Chief Financial Officer Friedrich Eichiner said. "I don't see a big problem if a manufacturer like Daimler is now cooperating with Nissan. They must have reasons to do that."
(Additional reporting by Soyoung Kim in DETROIT; Irene Preisinger in MUNICH; Jo Winterbottom in MILAN; John Bowker in MOSCOW; Helen Massy-Beresford in PARIS; William Rigby in SEATTLE; Editing by Lincoln Feast)
YOKOHAMA — With Nissan Motor Co. and its French partner Renault SA looking to expand their clout through a new cross-sharing deal with Germany's Daimler AG, the big question is: who is next in the realignment of the global auto industry?
Pressure has been heavy on carmakers to pursue expansion of scale to save on development costs of highly expensive green technology and to secure their foothold in fast-growing emerging markets by offering affordable compacts.
In the latest agreement, the Nissan-Renault alliance and Daimler will mutually swap 3.1 percent in shares to cooperate in the development of next-generation compact cars and to share fuel-efficient engine technology.
Just a few months earlier, Suzuki Motor Corp. inked a capital tieup with Volkswagen AG, as the German automaker seeks to expand its presence in India, where Suzuki has established a solid presence, while the Japanese automaker turns to Volkswagen's expertise in developing environmentally friendly vehicles.
"It costs a lot to develop wide-ranging technologies, and there is no clear favorite among the scattered environmental technologies, including electric vehicles and hybrids," said Takashi Akiyama, vice president of SC-ABeam Automotive Consulting.
"Also, with the rapid expansion of emerging markets, it's hard for an automaker to make it on its own," he said. "Expansion of scale is necessary for survival, and further realignment in the industry is anticipated."
With dwindling choices for cross-border alliances, attention has naturally fallen on Honda, one of the strongest players in the industry. The automaker has continued to eke out profits, even as most auto giants sank into the red after the financial crisis hit in 2008.
"You need great energy to reach an understanding with an alliance partner and time is quickly lost during that process," Fumihiko Ike, Honda's head of Asia and Oceania operations, recently told reporters. "It's faster to do it alone."
But analysts said even Honda, which sells the Fit compact and the Insight hybrid, may eventually need to shift course and look outside as rivals pose a rising threat by becoming bigger and more cost-efficient.
"There is no need to immediately join forces since its products, centering on compact cars, are selling well," said Shigeru Matsumura, an auto analyst at SMBC Friend Research Center. "But Honda will probably not be able to stay the way it is as others form alliances and boost their cost competitiveness."
Tatsuya Mizuno, a former auto analyst at Fitch Ratings in Tokyo and current representative of consulting firm Mizuno Credit Advisory, also suggested Honda may ally with South Korea's Hyundai Motor Co. in a shakeup that he predicted will consolidate the industry into five major automotive groups.
The dramatic shift in the global auto sector also comes as an unprecedented safety crisis pounds the carefully cultivated reputation of Toyota Motor Corp., the world's largest carmaker.
With global sales of nearly 8 million vehicles, Toyota remains ahead in terms of both scale and product lineup with minicar maker Daihatsu Motor Co. and truck maker Hino Motors Ltd. under its wing.
A pioneer in gas-electric hybrid technology, it also has close ties with Mazda Motor Corp. and Fuji Heavy Industries Ltd., which makes the Subaru brand and is owned 16.5 percent by Toyota.
Yet, the current story of Toyota includes a series of safety lapses, which its president, Akio Toyoda, has blamed on an aggressive drive for volume at the expense of product quality.
Despite the hype over the emergence of new alliances, deals have frequently collapsed in the past, including the breakup of Daimler and Chrysler Group LLC.
"When we came together with Chrysler, we were in agreement about the merger, but we hadn't had much thought about content of collaboration," Daimler Chairman Dieter Zetsche said at a news conference in Brussels, emphasizing that the relationship with Renault and Nissan will be "totally different."
Nissan President Carlos Ghosn, who concurrently serves as chief executive officer of Renault, said the "strategic cooperation" with Daimler — not to be mistaken with an alliance — will be long-term, while the pursuit of scale will continue as Nissan and Renault vie to become the No. 1 automotive group.
Under intense pressure to shave costs, automakers just outside the top global sales ranks are certain to face calls to develop or expand alliances or to explain to their shareholders why they are betting off going it alone.
That will mean renewed scrutiny of growth strategies by the likes of Japan's Mitsubishi Motors (7211.T), France's PSA Peugeot Citroen (PEUP.PA), Germany's BMW (BMWG.DE) and even Italy's Fiat (FIA.MI), analysts say.
"We are going to see some significant mergers, acquisitions, restructurings and spinoffs," said David Cole, director of the Center of Automotive Research in Ann Arbor, Michigan.
Just three years ago, Daimler moved to unwind one of the least successful deals in the history of the auto industry, dumping its Chrysler unit for a $30 billion loss.
Now, the Mercedes-maker has decided a more limited deal with the Renault-Nissan (RENA.PA) (7201.T) alliance headed by Carlos Ghosn will give it the small-car technology and scope it needs in the face of tighter emissions and fuel economy standards.
In return, Renault-Nissan will get access to Daimler's engines for Nissan's luxury Infiniti brand and the opportunity to share vehicle platforms and bring down costs at a time when its own alliance has been seen as sputtering.
Cole said the deal could be a blueprint for future collaboration in a high-cost area: developing the engine, transmission and now battery-drive systems that power vehicles.
"The historic view is that the powertrain defines the personality of the vehicle in the eyes of consumers. That's probably not true anymore," he said.
FIAT TO FOLLOW?
For smaller players such as Japan's Suzuki Motor Corp (7269.T), developing technologies such as a complex hybrid system on its own was not an option, which is why it aligned itself with Volkswagen AG (VOWG_p.DE) late last year.
Similarly, last month, Mazda Motor (7261.T) struck a deal to buy hybrid technology from market-leader Toyota Motor (7203.T).
Elsewhere, Italy's Fiat last year teamed up with bankrupt Chrysler, and analysts said it could look for further partners in Asia after having formed joint ventures with Tata Motors Ltd (TAMO.BO) in India and others in China and Russia.
"I could easily see Fiat shopping for another alliance in Asia," said Logan Robinson, a professor at the University of Detroit Mercy School of Law and former auto executive.
China is likely to be a key. Its emergence as the world's largest car market has been a boon to sales for U.S., European and Japanese car makers, but it has also created competitors such as Geely (0175.HK) -- fresh off its acquisition of Sweden's Volvo -- with deep pockets and global ambitions.
Still, after the numerous false starts over the past two decades -- most notably with the spectacular break-up of DaimlerChrysler after nine years -- some analysts remain skeptical that alliances can deliver as promised.
"I'm hoping that others don't go down this path" taken by Renault-Nissan and Daimler, said Erich Merkle, analyst at Autoconomy.com. "If you look at the history of alliances...they have a very checkered past. Most of them haven't worked.
While financial markets tend to price progress in quarters, it can take four years or longer to capture the full cost savings from collaboration in developing a new vehicle even if everything goes as planned, analysts say.
TOUGH EXECUTION
Even Nissan and Renault, lauded as a rare example of an alliance that has worked, has had a mediocre start.
After a decade together, the partners admitted last year to needing deeper integration, putting in place a more formal structure to squeeze out synergies that engineers had resisted. The partnership saved near-bankrupt Nissan from demise, but Renault has fallen into a slump Ghosn has struggled to reverse.
That could be a lesson for Fiat CEO Sergio Marchionne, who faces the daunting task of integrating Chrysler after taking a 20 percent stake in the weakest U.S. carmaker out of a U.S.-government funded bankruptcy.
Marchionne has said that automakers need global sales of at least 6 million cars and trucks to be competitive on cost. The Daimler-Renault-Nissan alliance would just clear that hurdle with global sales of just over 6 million units.
Fiat-Chrysler remains short of the mark, closer to 4.5 million units. But size alone is no guarantee of success.
General Motors Co GM.UL is a case in point. After its own 2009 bankruptcy, GM, like crosstown rival Ford Motor Co (F.N), is struggling bring the focus back to its core brands, led by Chevy.
Even Toyota, the world's top automaker, has proven that the bigger the ship, the tougher it is to steer. Rather than seek tie-ups, Toyota has said it would slim down its vehicle line-up to become more nimble and efficient.
FLYING SOLO
Having failed to agree terms on a capital alliance with Frances PSA, Japan's Mitsubishi Motors is seen by analysts in need of a partner to offset the cost of developing advanced technologies in areas like battery-powered cars.
But Mitsubishi President Osamu Masuko told Reuters last month that equity-based tie-ups were no guarantee of success.
"We have to remember that a capital alliance is no panacea," Masuko said. "If it were, then why didn't it work for us with Chrysler? Or with Daimler? What happened with all the capital ties that General Motors had?"
Honda Motor Co (7267.T) also believes it can find new efficiencies in-house will as Japan's second-biggest automaker continues to shun alliances, much like BMW.
"The key now is figuring out how to efficiently develop and produce cars," Honda executive Fumihiko Ike said last month. "And if the company becomes too big, efficiencies will also fail."
Honda, which prides itself in being the world's top engine maker and one of the few carmakers to produce its own transmissions, says it is open to tying up with battery and other components makers to develop next-generation vehicles.
BMW, meanwhile, has project-based ties, including with PSA in small engines, and expects its cooperation on sourcing with Daimler will continue, notwithstanding the latter's deal with Renault and Nissan.
"We don't want to give up our independence," BMW Chief Financial Officer Friedrich Eichiner said. "I don't see a big problem if a manufacturer like Daimler is now cooperating with Nissan. They must have reasons to do that."
(Additional reporting by Soyoung Kim in DETROIT; Irene Preisinger in MUNICH; Jo Winterbottom in MILAN; John Bowker in MOSCOW; Helen Massy-Beresford in PARIS; William Rigby in SEATTLE; Editing by Lincoln Feast)
Source;
Car industry braces for further shakeup
Pressure to cut development costs intense Kana Inagaki
By KANA INAGAKI
Kyodo News
Kyodo News
YOKOHAMA — With Nissan Motor Co. and its French partner Renault SA looking to expand their clout through a new cross-sharing deal with Germany's Daimler AG, the big question is: who is next in the realignment of the global auto industry?
In Japan, experts say eyes are on Honda Motor Co., the nation's second-largest automaker, although it has so far shown no indication of ditching its trademark go-it-alone policy.
Pressure has been heavy on carmakers to pursue expansion of scale to save on development costs of highly expensive green technology and to secure their foothold in fast-growing emerging markets by offering affordable compacts.
In the latest agreement, the Nissan-Renault alliance and Daimler will mutually swap 3.1 percent in shares to cooperate in the development of next-generation compact cars and to share fuel-efficient engine technology.
Just a few months earlier, Suzuki Motor Corp. inked a capital tieup with Volkswagen AG, as the German automaker seeks to expand its presence in India, where Suzuki has established a solid presence, while the Japanese automaker turns to Volkswagen's expertise in developing environmentally friendly vehicles.
"It costs a lot to develop wide-ranging technologies, and there is no clear favorite among the scattered environmental technologies, including electric vehicles and hybrids," said Takashi Akiyama, vice president of SC-ABeam Automotive Consulting.
"Also, with the rapid expansion of emerging markets, it's hard for an automaker to make it on its own," he said. "Expansion of scale is necessary for survival, and further realignment in the industry is anticipated."
With dwindling choices for cross-border alliances, attention has naturally fallen on Honda, one of the strongest players in the industry. The automaker has continued to eke out profits, even as most auto giants sank into the red after the financial crisis hit in 2008.
"You need great energy to reach an understanding with an alliance partner and time is quickly lost during that process," Fumihiko Ike, Honda's head of Asia and Oceania operations, recently told reporters. "It's faster to do it alone."
But analysts said even Honda, which sells the Fit compact and the Insight hybrid, may eventually need to shift course and look outside as rivals pose a rising threat by becoming bigger and more cost-efficient.
"There is no need to immediately join forces since its products, centering on compact cars, are selling well," said Shigeru Matsumura, an auto analyst at SMBC Friend Research Center. "But Honda will probably not be able to stay the way it is as others form alliances and boost their cost competitiveness."
Tatsuya Mizuno, a former auto analyst at Fitch Ratings in Tokyo and current representative of consulting firm Mizuno Credit Advisory, also suggested Honda may ally with South Korea's Hyundai Motor Co. in a shakeup that he predicted will consolidate the industry into five major automotive groups.
The dramatic shift in the global auto sector also comes as an unprecedented safety crisis pounds the carefully cultivated reputation of Toyota Motor Corp., the world's largest carmaker.
With global sales of nearly 8 million vehicles, Toyota remains ahead in terms of both scale and product lineup with minicar maker Daihatsu Motor Co. and truck maker Hino Motors Ltd. under its wing.
A pioneer in gas-electric hybrid technology, it also has close ties with Mazda Motor Corp. and Fuji Heavy Industries Ltd., which makes the Subaru brand and is owned 16.5 percent by Toyota.
Yet, the current story of Toyota includes a series of safety lapses, which its president, Akio Toyoda, has blamed on an aggressive drive for volume at the expense of product quality.
"The advantages of scale are huge and will need to be pursued as they become increasingly important," Mizuno said. "But as the scale becomes bigger, the question is whether you can maintain strong management."
Despite the hype over the emergence of new alliances, deals have frequently collapsed in the past, including the breakup of Daimler and Chrysler Group LLC.
"When we came together with Chrysler, we were in agreement about the merger, but we hadn't had much thought about content of collaboration," Daimler Chairman Dieter Zetsche said at a news conference in Brussels, emphasizing that the relationship with Renault and Nissan will be "totally different."
Nissan President Carlos Ghosn, who concurrently serves as chief executive officer of Renault, said the "strategic cooperation" with Daimler — not to be mistaken with an alliance — will be long-term, while the pursuit of scale will continue as Nissan and Renault vie to become the No. 1 automotive group.
Source;
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