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