Now the fine powdered debris has settled, I thought I’d gather up some third party opinions on the mooted Renault/FCA merger.
I’ve decided to amalgamate three sources of information. They are the Financial Times, the New York Times and Autocar. My own view is that the merger is a re-run of the value-incinerating union of Chrysler and Mercedes twenty years ago. But what do the other commentators say if Renault and Fiat end up fused? A car crash or a marriage made in Denver?
John Gapper in the FT (May 30, 2019) takes a clearly positive view. He calls mergers among car-makers “inescapable” (but so is death). The sub-editor at the FT picked a choice Gapperism as a section header: “Amalgamations are difficult to make work, but they offer a chance to share costs and brand loyalties.” I wonder if Mr Gapper is awake when writing this. “Sharing brand loyalties” is some form of oxymoron. I can’t begin to imagine what he thinks it means. Maybe it’s analogous to wife swapping which would be “sharing partner loyalties”, I suppose. Moving on.
Gapper identifies the following advantages in a merger: they can share investment in electric vehicles and autonomy; they can have better economies of scale (point one re-stated, no?) and it’s better than an alliance. Gapper states that alliances “conceal unresolved tensions and factionalism” and, it is implied, mergers do not. Rover? BLMC? Ford and Volvo? GM and Saab. Gapper concludes by saying that if mergers are hard then isolation is harder. Gapper plainly wrote his article before breakfast.
If we move to the New York Times (May 31, 2019) reporters Jack Ewing, Neale E. Boudette and Ben Dooley discuss the matter in more he-said/she-said terms: “How Fiat + Renault could rule the world. Or flop”. The pros are listed as 1) the merger gives each firm new markets; 2) they compliment each other in terms of products and reason 3 is just a declaration that if it works the merger will be great so that’s not a reason at all, it begs the question.
On the downside the NY Times team says 1) there are risks to Renault’s alliance with Nissan (the Japanese hate the idea, apparently) 2) car mergers usually fail (see above) and 3) the benefits of savings could be very small and 4) the resultant company might be unmanageably big. Simply, the most profitable companies are not the biggest ones – BMW made more money than GM last year.
On balance, the writers sum it up by saying a merger might just be a matter of mere survival. Mere survival really does not sound like a compelling reason to do something that might threaten your existence.
Finally, we turn as turn we must to Ronan Glon in The Autocropley. Glon begins by reminding us that a Renault-Nissan + FCA sum yields 9 million car sales annually (is that any more car sales than is made by the firms individually?). Those economies of scale, as above, relate to saving money on autononononomous platforms and electric vehicles. Has anyone worked out the marginal saving on the fifth, sixth, seventh, eighth and nine millionth car? Put another way, how much more money is saved by the last few million extra cars?
Julian Rendell, also at The Autocropley, offers some further points. Rendell wins respect for getting the whole thing boiled down to fit in the opening paragraph (impressive): “The mega-merger of Fiat Chrysler Automobiles (FCA) and Renault, poised to create the world’s biggest car group, has been welcomed by analysts. But the threat of factory closures, cost savings that struggle to emerge and the complications of making an unwieldy conglomerate workable are just three of the major risks.” We also learn that this putative 9 million units does not include Nissan or Mitsubishi – so the total number of cars involved might be 15 million.
Unique among the commentators, Rendell says the merger would allow Fiat to sell a full range of cars (as in supermini up to saloon plus all the other niches). True, but nobody will want them I respond. The AR Giulia is arguably a perfectly nice and capable car where the development seemed unhindered by much of the usual Fiat cheese paring and lunacy. But nobody wants those, not in huge amounts.
By the time Fiat’s managers have finished pasting a Renault platform with caveats, requirements, cost-cuts and early lunch receipts they are well on the way to mediocrity. Think Croma on a Talisman platform. Superb. And maybe it’ll sell in Minnesota and New York too. Think Ghibli on a Talisman platform? It could happen.
Rendell turns it the other way too. He writes that Renault could re-enter the luxury market ‘through’ Alfa Romeo and Maserati. Rendell used the word “through” in some new and very flexible sense, I feel. As noted, AR and Maserati are pleasing disappointments. I don’t see evidence that putting a big Renault next to a Maserati is going to help the French car sell. No one will understand it.
Having got this far, I feel the big winners in any merger that goes ahead will be the executives who plan it and reap performance bonuses. The long term costs will be borne by Renault and Fiat employees and the cities where they work. I look at all these articles and see the same trope as you see played out in the business papers and business reports: business as sport.
There seems to be little moral or ethical sense in any of these items, just a matter of entertainment and hypothesising. DTW is unfraid to spell it out: the Renault-FCA merger is a car-crash disaster mess catastrophe. Swerve to avoid.