March 9, 2001

Mergers Redux

Andrew Charles

It's been a year and a half since my last merger article (October,1999) and things seem to have settled down for a bit. Now then is a good time to review the state of play and see where things may go from here.

BMW

BMW finally threw up its hands and practically gave away the Rover Group, but first re-organized the more attractive assets into different sections of BMW (UK) Holdings and sold Land Rover to Ford. In addition to the new Mini produced by BMW (UK) Manufacturing, BMW also kept the re-organized Riley and Triumph, British Motor Heritage (producing parts for older English cars) and other businesses such as Midland Powertrain.

After losing to VW in a bid for Rolls-Royce Motor Cars Ltd, BMW made an end run, acquiring the license from aero-engine partner Rolls-Royce PLC. An entirely new car is under development, to be built at a new underground plant at Goodwood (subject to development approvals).
Score: BMW, Mini, Rolls-Royce (active), Riley and Triumph (dormant).

DaimlerChrysler

Executives at DaimlerChrysler must be wondering what they have gotten themselves into. After taking control of Mitsubishi Motor Corp. the company is hit with a long string of vehicle problems the company had been hiding from authorities for years. Then Automotive News discovers the company has a problem with US regional offices faking sales to meet quotas. Chrysler has fared just as badly. Increased competition for its key minivans has hit the company hard and the company announced massive losses despite strong sales. Combined with the weak stock market the German-American giant has seen its market value tumble to below the pre-merger level. Speculation surfaced that the company might be vulnerable to a takeover itself. Mercedes-Benz would be the prize, but with both Chrysler and Mitsubishi involved a potential buyer may find the anti-trust issues too great an obstacle. Going back to the future Chrysler and Mitsubishi will co-operate on future models, but new Korean partner Hyundai (with its subsidiary Kia) has been left to fend for itself. The loss of Plymouth adds to DC's roster of fallen marques (Hudson, AMC, DeSoto, Willys etc.).

Maybach has been part of Daimler's engine business for some time (having built engines for the Zeppelins), and the marque's history producing large expensive cars will finally be revived with a model to compete with BMW's Rolls-Royce and VW's Bentley.
Score: Mercedes-Benz, Dodge, Chrysler, Jeep, Mitsubishi and Maybach.

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One Response to “Mergers Redux”

  1. In the years since I wrote this, there have been a number of changes, some minor, and others quite major. Going down the list:

    DaimlerChrysler de-merged into Daimler AG and Chrysler LLC, and sold its stake in Mitsubishi.
    Daimler AG retains its truck and bus brands (including Mitsubishi Fuso), and Mercedes-Benz and smart in the car group. A cross-licensing agreement with Jaguar covers the use of the Daimler name.

    Chrysler LLC retains the active Dodge, Jeep and Chrysler brands, and has re-affirmed its ownership of the defunct Willys brand.

    Hyundai has kept out of the merger game since acquiring Kia, but has added a new brand in the Korean domestic market with its Genesis luxury sedan (in other markets sold as a Hyundai).

    Fiat has ended its alliance with GM after extracting a hefty divorce settlement. The company's subsequent success makes this one of GM management's worst decisions in recent years. After dropping Autobianchi, last seen in the Italian domestic market, Fiat is said to be exploring a new low-cost brand. Maserati, formerly owned by Ferrari, is now allied with the group's main auto operation, now known as Fiat Group Automobiles.

    Ford has unwound several key acquisitions in the last few years, first selling Aston Martin Lagonda to an Anglo-Arab investment syndicate, and most recently Jaguar Land Rover to Indian automaker Tata Motors. Rumors persist that Ford is either interested in selling Volvo, or has been approached by other automakers seeking a luxury acquisition, but the company is far more integrated into the Ford organization, with common powertrains and platforms underlying every model.

    GM has also unwound several equity investments, although not on the scale of Daimler and Ford. Its minor interests in and alliances with Fiat, Isuzu and Subaru have been ended, and engine development centers in Germany and Japan previously controlled by GM returned to Isuzu. Its alliance with Suzuki remains, on a smaller scale, but its equity interest has been reduced. The company is now evaluating the future of the Hummer brand, acquired from AM General, and despite denials rumors persist that other brands are also being evaluated for sale or closure (fueled by an active and even malicious campaign by disaffected members of middle management).

    Phoenix Group, which acquired MG Rover, predictably imploded, with government investigations continuing at enormous expense into the reasons. Its assets have been divided among several parties, Chinese automakers SAIC Motor and NAC acquiring the main carmaking operations, and a scion of the Riley family acquiring MG Sport and Racing and the X80 project. The Rover brand, and associated trademarks, previously licensed from BMW, were then sold by the German company to Land Rover. As a result Tata Motors has acquired not only Jaguar, Land Rover and Range Rover, but also Daimler, Lanchester, Rover and Sterling. Having lost the chance to acquire Rover, SAIC established its own Roewe brand as an alternative, and subsequently acquired NAC and its NAC MG operations, including the Austin, MG, Wolseley and Austin-Healey brands. An alliance with HFI Automotive and the Healey family supports the possible revival of the latter marque.

    Peugeot SA has augmented its non-equity alliances with Ford in diesel engines and Fiat in commercial vehicles. It now produces small cars in co-operation with Toyota, 4-cylinder gasoline engines in alliance with BMW, and SUVs in alliance with Mitsubishi. The Panhard et Levassor operation has since been sold to military 4×4 specialist Auverland.

    Renault's most recent activity has been an alliance with Russian automaker AutoVaz, owner of the Lada brand.

    German automaker Volkswagen, after acquiring a number of other companies over the years, has most recently found itself the target of long-term partner Porsche, whose founder was responsible for the original Volkswagen prior to WWII.