A Research Report on the Change in Global Auto Industry (VI)

3.  Automakers will be more cautious in their selection of expansion modes

General Motors was forced to sell many of its acquired auto shares or assets, including the early Fiat, Isuzu, Fuji Heavy Industries and Suzuki, the recent Saab, Opel. After selling its Land Rover and Jaguar, Ford Motor is seeking a buyer for its Volvo. Daimler Ag sold the Chrysler brand in 2007 at a loss. It is not difficult to find that in the passenger vehicle sector, international mergers and acquisitions (M&A), especially inter-continental ones, are rarely successful. The highly confident acquisitions of these brands have ended up in selling them at huge losses, often under unbearable burdens. This fact reminds late-comers to the M&A craze to be more cautious about their expansion modes.

In contrast to GM's ambitious global M&A, the expansion mode of Toyota is very sound and solid. Apart from the acquisition of Daihatsu Motor in its own country, Toyota made its overseas expansion by investing in building the facilities. Ford's operating mode of setting up subsidiaries in Europe is also more sound and successful than GM's buying of Opel as its European unit. From another point of view, these also confirm that the international expansion mode must be cautiously chosen.

Of course, this does not mean that the overseas expansion must follow the slow mode of investing in and building your own plants. The Renault-Nissan Alliance has revealed another successful integration mode to the global auto industry. The results of our survey show that more than 70% of the respondents believe that alliance mode is preferable to the direct acquisitions.

For the industry reference, we will analyze the difference between the Renault-Nissan Alliance mode and General Motors' M&A mode.

The Renault-Nissan Alliance has mainly taken the following specific unique measures:

① Renault and Nissan set up their joint management body of the alliance (at first it was the Global Alliance Committee GAC, and then the Renault-Nissan Co., Ltd. RNBV, 50% -50%), which is responsible for the development of the alliance's strategy to guide the two companies in their common global business, but they do not interfere with each other's independent business activities.

② Joint procurement - the two sides have formed a joint purchasing company to make the procurement most competitive in quality, cost, logistics and other aspects, and coordinated their global supplier relationships.

③ Platform-sharing strategy - the use of common components, the establishment of a "power transmission parts bank" that can supply for all models from the same platform, and the convergence of industrial production processes in order to share the production capacity.

④ Opening up markets mutually - Renault is more competitive in Europe, South America, North Africa and the Middle East markets, while Nissan performs better in Asia, Australia, North America, Central America, Africa. Therefore, by establishing the alliances, both partners can use their respective strengths to help each other enter their relatively weak markets.

Compared with the Renault-Nissan the Alliance, the expansion mode of GM has such shortcomings:

① Acquisition with full control deprives the acquired company of its independence and gives it no sense of direction in the development strategy of the parent company.

② The acquired the brand, once lost in the multi-brand strategy of the parent company, will see the gradual weakening of its original brand features and consumer acceptance.

③ GM-style expansion seems to have combined the personnels and assets more closely than the Renault-Nissan Alliance, but lacks the high-performance of the Renault-Nissan alliance. On the one hand, the complex relationship makes the integration very difficult, and on the other hand, the complicated ranges of brands and products have greatly increased the difficulty of effective integration.

(To be continued)