Special Report on the Motor Show (1): Take your partners to survive: Conglomeration is the name of the game, says Martin Derrick
Tuesday 20 October 1992
It could also offer some pointers to the way the car manufacturing industry is heading. Recently it was announced that DAF and Mercedes-Benz Trucks were holding talks aimed at bringing the two companies together, but the move towards greater collaboration - and even acquisition and takeover - between truck manufacturers started years ago.
As long ago as 1975 Iveco was set up through the integration of five marques from three different countries. Since then it has acquired Ford of Britain's truck division, Pegaso of Spain and Seddon Atkinson of the UK.
However, Iveco's chief executive officer, Giancarlo Boschetti, says: 'It takes no great insight to realise that the world does not stop in Europe, that Europe is not the only stage on which the success of vehicle manufacturers will be played out in the future.'
So does the truck industry trend, for larger conglomerations to come together to achieve economies of scale and to pool technological and production expertise, and to sell products worldwide, hold good for the car manufacturing industry?
Karl Ludvigsen, chairman of the motor industry analysts Ludvigsen Associates believes that to be so. 'Further concentration in Europe is likely,' he says. 'It is needed to gain improved efficiencies and reduce unproductive overheads to meet the Japanese challenge. It is also needed to take full advantage of the opportunities provided by the single market in Europe.'
Certainly, the motor industry as it stands today looks set for some big changes. Rolls-Royce's trading loss of between pounds 10m and pounds 15m for the first half of the year is increasing speculation that it will have to find a partner. Analysts say the company will not be able to invest sufficient on its own to match the developments of Mercedes-Benz, BMW and Japanese manufacturers at the upper end of the market.
Similarly, Porsche has seen sales worldwide falling away and it is thought that it will come to an agreement with a larger partner, probably Volkswagen.
Rover's parent company, British Aerospace, can sell the company next August without having to repay the incentives it received to take the company off the Government's hands in 1988.
Despite statements by John Cahill, the BAe chairman that there are no plans to offload Rover, it is understood that two major European manufacturers - believed to be Volkswagen and Fiat - are negotiating with BAe to buy the 80 per cent stake in Rover that BAe holds.
Certainly Mr Ludvigsen believes that Fiat will have taken over that 80 per cent share by 1994, as a means of gaining access to a healthy share of the UK market, an established dealer network and productive manufacturing facilities. The Italian company would also be acquiring the jewel in Rover's crown, Land-Rover, taking it into the one sector of the market in which the Fiat Group is not represented.
Mr Ludvigsen also predicts that Volkswagen will acquire not only Porsche but also Chrysler. operations. VW will gain access to the North American market eliminating 'the only weakness in its global strategy'.
In France, Renault will escape from government control in 1996 and will then merge with the PSA (Peugeot and Citroen) Group to form a single company, which will also encompass Volvo car and truck activities.
More radically, Mr Ludvigsen argues that Ford will lose its independence in Europe by the end of the century. 'By 2001 I forecast that Ford will be a minority holder of an interest in Fiat's European car operations, which will have absorbed the European Ford plants and networks with one exception: Jaguar, which will remain a subsidiary of Ford in the USA.'
Outlandish speculation? In the 1980s Fiat and Ford went a long way towards merging their European operations. Talks broke down because neither party wanted to lose management control. But Fiat did take over Ford's UK truck operations and more recently has acquired all Ford's farming and construction equipment operations worldwide.
Mr Ludvigsen's scenario for the year 2005 leaves just six European motor companies, excluding the Japanese.
These are BMW, which will retain its independence and which will also have acquired Rolls-Royce along the way; GM Europe, with its Lotus, Saab and Polish FSO operations; the Peugeot-Citroen- Renault Group, which will include Volvo; VW-Chrysler, which will encompass Chrysler Europe, and the Lamborghini, Porsche, Skoda, Seat, Audi and Volkswagen marques; the Fiat-Ford Group, encompassing Fiat, Ford, Ferrari, Lancia, Maserati, Alfa Romeo, Innocenti, FSM, Vaz, Zastava and Rover and Land-Rover, though perhaps not Jaguar and Aston Martin, which would remain subsidiaries of the US Ford parent; and Mercedes- Benz, which will retain its independence.
It seems remarkable that so much change could take place in such a short time. Some of the decisions that will have to be made will be hard, harsh even; and some of today's best-known showroom names may disappear.
But this is nothing new. Let us not forget that Rover is all that remains of many proud independent British brands from Austin to Wolseley. And on the Continent, Borgward, Panhard, Simca and Delahaye are little more than memories now. Over the years there have been many periods of mergers and acquisitions as the motor industry adjusted to new economic conditions.
Change is already in the air for the European motor industry. The chiefs of the car companies are in no doubt about the threat from the Japanese, who in past years have already targeted and then picked off other strategic industries one by one.
Life & Style blogs
Well, it seemed like a good idea at the time: 10 worst gadgets of recent times
The secret to a great sex life revealed: Two cups of coffee a day
New Zealand 'the best country to work as a prostitute', says sex worker advocacy group
What do the emoji on Snapchat mean?
Facebook status updates indicates whether a user is narcissistic or neurotic, research finds
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
- 1 Games of Thrones actor Lena Headey makes emotional promise to her unborn daughter
- 2 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 3 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
- 4 Female Muay Thai champion hustles coaches to give them a beating
- 5 Picture of couple posing with beached dolphin 'that later died' causes outrage
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...
£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...