Mr. Warburton Writes a Letter

Analysts Bernstein Research rediscover a lost art, but in doing so have they shifted the paradigm?

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Something unprecedented has happened. It’s probably too early to tell whether it will prove to be an isolated occurrence or a sign of a wider shift in the manner in which the industry operates, but the implications could well prove to be far-reaching.

Max Warburton, the senior automotive analyst from Wall Street financial analytics firm, Sandford C Bernstein, and leading soothsayer on matters pertaining to the motor business wrote an open letter last week to Renault Chairman, Jean-Dominique Senard, suggesting he abandon efforts to secure a rapprochement with erstwhile partners, Nissan and dissolve the partnership entirely, thus allowing the putative merger with Fiat Chrysler Automobiles to proceed unhindered.

With a long and broadly honourable position in our collective discourse, the open letter has been for the most part politically motivated, often written by outsiders, who have sought (and in many cases succeeded) in shifting public opinion and altering the course of history. Perhaps the best known of the archetype being Émile Zola’s 1898 inflammatory epistle, J’Accuse, written to highlight the bigoted treatment of French army officer Alfred Dreyfus, unjustly accused by the French authorities of espionage.

Now before continuing, lets be clear that Max Warburton, for all his eloquence is no Émile Zola, and that his convictions, no matter how strongly held or well meant cannot be classed as anything like as altruistic. In his letter, Mr. Warburton is at pains to highlight his “objective, impartial view on things.” Casting doubt upon the true benefits of the Nissan alliance, he suggests that the presumed advantages are exaggerated and points to the greater margins rival carmaker, PSA currently enjoys.

Sensing that it is mostly emotional arguments that are hindering a clearsighted path out of the current bind the French car giant’s chairman currently finds himself in, Warburton urges a clean break, akin to that of Daimler, when they severed their failed acquisition of Mitsubishi a number of years back.

In the Warburton purview, a full-merger with FCA appears to contain few downsides, delivering improved synergies, a more collegiate business culture and an easier life than working with a Japanese business, which in his assessment is now fully bent on retrenchment.

One can only guess at Mr. Senard’s reaction to this missive landing in his already crowded inbox, after all the embattled Renault Chairman is probably up to his eyes with clairvoyants, consultants and courtiers tugging at his sleeve. But what we can say with some certainty is that Mr. Warburton does know his onions. The real question however must be exactly whose interests the Bernstein Research analyst-in-chief is serving here?

Because what this does suggest is that perhaps a merger between FCA and Renault has more advantages for the financial and legal sectors than it might have for the relevant auto businesses themselves, given the scale of both carmakers and the likely complications inherent in such a marriage – to say nothing of the risks.

What else lies unspoken is the undeniable fact that mergers and acquisitions rarely, if ever deliver anything like the benefits their champions proclaim. Because, even to this pound shop analyst, this is no shoe-in solution for either entity.

The other factor which deserves note here is the fact that Warburton’s intervention failed to receive the slightest coverage outside of Automotive News (who hosted the letter in the first place) and even they did not see fit to comment or analyse it further.

Up to now, the Max Warburtons of this world have maintained a measure of distance from the day to day running of the motor businesses they monitor and pronounce upon. They have been (as I have suggested before) more akin to the gossip columnists of Hollywood’s golden age, commenting, influencing and nudging the movers and shakers. However, with this intervention, Mr. Warburton appears to be crossing a line.

So are we witnessing a new front in the manner in which the financial markets influence the major automotive players? Because it doesn’t require a soothsayer to realise that surely the best placed people to decide the business decisions of carmakers ought to be the carmakers themselves.

Author: Eóin Doyle

Founding Editor. Content Provider.

7 thoughts on “Mr. Warburton Writes a Letter”

  1. Aren’t financial analysts the guys who rallied for VW shares a couple of years ago and lost billions of dollars because they knew nothing about the background and only looked at the seemingly attractive numbers (share prices)?

  2. This is an astonishing development indeed.

    Either Mr Warburton truly is an idealist who couldn’t bear Renault damaging themselves any longer. Or this is the most blatant case of the financial markets trying to impose a strategy that fits suits their agenda I can think of.

    In either case, this is an occasion we, and the the automotive industry in particular, ought to analyse with great scrutiny.

  3. Interesting article mr. Eóin about markets, politics, industry and brands. I also read recently a relevant article about the life of Lee Iacocca, Ford’s and later Chrysler’s CEO, and it surely corresponds to the business machinations that change the fate of artifacts as well as people.
    And, Herr Butt, I have no doubt that we -i.e. all you, our fluent and scholarly authors -can analyse mr. Warburton’s proposal in absolute scrutiny, but will the markets and the financial decision makers even notice? For me it looks like the Aesop’s fable: “The Mosquito and The Bull”.

    I hope you can rebut me on this!

    1. Constantinos,

      thank you for that reminder of the classical education I once received and mostly forgot about since.

      If I told you Max Warburton reads my stuff, you’d probably believe I’m boasting, so I won’t.

      Generally speaking, I prefer to understand matters, even if I don’t have any direct say in them – which is why I follow the news in countries other than my own, where I’m unable to cast a vote and so on and so forth. A mosquito needs to keep itself busy, after all.

  4. Thanks for the reply Herr Butt.
    I want to say that it’s always better to be “The mosquito with the bull” rather than “The frog with the ox”.
    And being a πολίτης of the world much nobler than an ἰδιώτης at home.
    So much so for classical education!
    But really, do the automotive brands have a certain bureau in their marketing department that deals with the varius publications, printed or online, filters and forwards the different opinions to the decision headquarters? And if yes, how important is it really to them, especially when, as bold mr. Freerk de Ruiter noted, the numbers prosper?
    Thanks again.

    1. Does anyone notice, you ask? Maybe not, but surely that isn’t the point. Here at Driven to Write we choose to submit the news to an element of analysis – and in the case of this story, you may not find anything of its ilk published anywhere else – which I might suggest is notable in itself. Might I ask, how would you wish this story to be approached?

      I would suggest that yes, there are probably people within the PR and marketing functions of major companies who do monitor the media to ascertain how their brand is being reported upon. Do they care what the likes of DTW say? Probably not. We are after all, proudly and defiantly uninfluential. But as we all know, especially at this time of the year, mosquitoes can be very irritating indeed.

      But yes, perhaps this is all vanity and we are wasting everyone’s time. But at least we’re sticking our necks out.

  5. This matter is highly political since Ghosn was replaced with both Senard (Chairman) and Thierry Bollore (CEO). Senard comes from Michelin and is an ally of the French government, while Bollore was Ghosn’s protégé. Senard has been charged with repairing the Nissan alliance while Bollore knows how to run Renault’s day to day operations.

    I think it is very dramatic and interesting times because obviously the French government kept Bollore because Renault needs him.

    Max Warburton has stated that it’s his opinion the proposed FCA merger cannot succeed as long as the Nissan alliance remains, he has commented:

    “this idea is half-baked, politically almost impossible to deliver and even if achieved, the resulting company would be unmanageable,” *

    Warburton is the mosquito, there is no way he is going to influence Senard to abandon his loyalty to the French government. His open letter seems meant to imply that Senard is pliable and weak enough to abandon his primary mission, which given the politics here seems really unlikely. Therefore it is doubtful that this open letter is really intended for Senard or anyone at Renault to benefit from, in fact its premise appears to cast dispersion on the integrity of “La Régie”.

    Unfortunately a mosquito can cause harm, even spread fatal disease. Warburton reveals his real motivation in the article I linked, which is to devalue “socialist” Renault in the eyes of his real intended target audience, investors who he hopes will genuflect toward the cult of personality surrounding one individual from an entirely different company:

    “PSA may not bring electric tech or Asian exposure but it does come complete with a superstar CEO with a proven ability to lead, motivate and integrate,” he said of Groupe PSA CEO Carlos Tavares… “And in this industry, that’s probably worth more than a few million units more ‘scale,’ an extra nameplate or the ability to build a battery.” *

    Warburton’s reasoning here is flimsy. “This venture will succeed because I am a superstar” is circular reasoning which does not make for a compelling business case.

    * https://www.cnbc.com/2019/03/27/fiat-chrysler-shares-climb-on-half-baked-merger-talk.html

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