Auto industry partnerships usually end badly, yet couplings continue

Mergers have been proven not to work in the auto industry, so why are companies continuing to do so?

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The longer that I am in this business, the more I realise that many of the people running car manufacturing companies have no sense of history. And by history, I almost mean last year, if not last week. There almost seems to be a hubris in ignoring George Santayana's pointed — and justifiably famous — quote that "those who cannot remember the past are doomed to repeat it".

And my, haven't we seen this bit of history in the automotive industry's past. Sergio Marchionne, CEO of Fiat and erstwhile American car maker Chrysler, wants another partnership, this time with someone in the Far East. The leading candidates would seem to be Mazda or Suzuki. It's all part of Marchionne's theory that only the largest shall survive the impending industry shake-up about to wreak havoc.

Marchionne remains committed to the ideal that bigger is always better. The combination of Fiat and Chrysler is still selling about 50 per cent too few cars for its sweater-wearing CEO, who sees eight million cars a year as the lower threshold of viability for a major player in the industry (by the way only, GM, Toyota and Volkswagen currently meet that criteria).

Meanwhile, General Motors, not satisfied with its resurgence to the top of the worldwide sales charts, has hooked up with PSA/Peugeot-Citroën to cure the travails of its perennial money-losing subsidiary, Opel. Of course, having the French telling the Germans how to improve efficiency is like the Italians explaining to Americans how to make more reliable cars. The saviour brings precious little to the table.

But while the merge and acquire theorem of success may make sense on a corporate ledger and in the heartless synapses of chartered accountants, it hasn't worked so well in real life. GM, for instance, has been a veritable smorgasbord of disparate car makers, some still current (Chevrolet, Buick, Cadillac, GMC and others), some recently departed (Saab, Saturn, Oldsmobile and Pontiac) and still others long forgotten (Mclaughlin, Oakland and countless more). Although the company has returned to what I am sure it sees as its rightful place atop the global sales chart, its success is hardly about the bigger-is-better motif. Indeed, quite the opposite, the company didn't return to the black until its recent, forced ditching of underperforming brands. Its recent success has more to do with jettisoning debt, contracts and loads of unloved model lines than any expansion of its portfolio.

It's the same for Chrysler. It seems like only yesterday that Daimler was welcoming the Auburn, Michigan-based firm into its bosom, only to have the entire merger of unequals fall apart in internecine jealousies nine years later. Does anyone really think that it is Fiat's superior management that is currently floating Chrysler's boat? Or, as is more likely, the American brand's shedding of debt and obligation through bankruptcy that is feeding the company's recent glorious turnaround?

Meanwhile, Ford, arguably the most successful of Detroit's once-mighty Big Three, became the darling of the motoring media largely because it dumped — voluntarily, in this case — all it extraneous brands. Aston Martin, Jaguar, Land Rover and Volvo were all sold/dispensed with/thrown-to-the-wolves, while Mercury was simply axed outright so that the parent might concentrate on its core brand (OK, two core brands, but many wish the Blue Oval would also deep six laggardly Lincoln as well). Even then — and still profitable — Mazda, one of the apples that Marchionne reportedly covets, was largely shunted aside.

The latest darling of the grandiose, Volkswagen, is finding managing so many disparate interests difficult. Under its wing are the brands Audi, Skoda, Seat, Bentley, Lamborghini, Bugatti and, of course, VW, a rather wide swathe of the market. And in fact, the buying spree at VW Group seems to be continuing; just this week, Audi has allegedly expressed an interest in buying, of all companies, Ducati, that Italian purveyor of monster motorcycles.

But remember three years ago when VW's takeover of Porsche was imminent? Well, the actual nuptials are still as elusive as a George Clooney "I do" and, indeed, VW's major-domo, Ferdinand Piech, is in trouble with German law-and-order types because a German court couldn't figure out whose interests he was serving when the whole mess went down (Piech served on the supervisory board of Porsche at the time of the imbroglio while also being the chairman of VW).

Meanwhile, the other apple of Marchionne's eye, Suzuki, is amid a separation from Volkswagen as acrimonious as any Kardashian divorce. The German and Japanese companies penned a stock-swap partnership back in 2009 but that fell apart when Suzuki approached, you guessed it, Fiat for a new diesel engine instead of relying on partner Volkswagen (if this is starting to sound like the plot to a bad episode of Coronation Street to you, you're not the only one).

The more you look at recent automotive history, the more the odds are against the success of mergers/partnerships, so much so that one has to wonder about the true motivation of these recent developments. I think GM's announcement of the Peugeot alliance is just GM doing what it has traditionally always done, trying to acquire expertise. And, likewise, I suspect that Marchionne's true rational for incessant acquiring/partnering is that he wants to dilute the importance of the troublesome Fiat division as much as possible (since he took over the Italian firm, he's been fighting with its unions and trying to move as much production as possible out of Italy). Indeed, things seem so desperate that Automotive News is reporting that Marchionne tried to broker an alliance between GM and Fiat (cue those soap opera metaphors again).

GM will not solve Opel's overcapacity production problem and declining market share by joining hands with similarly challenged Peugeot. And the solution to the problem of managing two disparate car companies with vastly different cultures is not to make it a three-way partnership. Dysfunctional partners do not a successful marriage make.