The Auto Writer

Sergio Marchionne Says Just Six Major Automakers Will Survive Current Crisis

The pundits and prognosticators have been weighing in these past several weeks regarding the state of the American auto industry. Some comments are pure comedy, others an outright tragedy, with a bunch of comments being a mixture of both. Needless to say that the demise of our auto industry isn’t something I relish even if I believe that much of the blame for failure rests on the shoulders of management and unions.

Looking beyond our borders, it isn’t difficult to see that the global auto industry is going through some tough times too. So much so, that the CEO of Fiat – Sergio Marchionne (pictured) – predicts that once this global crisis passes, that there will be just six major players left standing.

Sure, several of the niche players including Fisker and Tesla, and the like may survive on their own, perhaps even thrive, but when it comes to big volume players then Marchionne only sees six survivors, each with the need to make at least 5.5 million cars annually in order to be profitable.

Presently, five automakers hit that threshold including Toyota, General Motors, Volkswagen, Ford, and Renault-Nissan. But, Marchionne is suggesting that the six remaining players will be just one American company, one German automaker, one French-Japanese (which would be Renault-Nissan), a Chinese company, just one in Japan, and some other European player.

Deducing from what he is saying it appears that some sort of GM-Ford-Chrysler company would emerge, that Volkwagen would be that German company, and the combined Chinese automotive production empire would emerge as one player (Brilliance/Chery/Changfeng et al). Since Toyota is already tops in Japan then they are the logical survivor there with the aforementioned Japan-French hybrid being Carlos Ghosn’s Nissan-Renault. That just leaves one other European player — could Mr. Marchionne be thinking it would be BMW/Mercedes who would snap up Fiat (he wishes), Peugeot, Volvo, Saab, and whatever other smaller companies are available?

Six automakers sounds like too few companies, especially in the short term. The Hyundai Kia Automotive group produces just over four million vehicles annually, while Honda is just behind that number. What about Tata Motors? Sure, they’re not much of a presence yet, but with the Indian market set to take off, sales could explode within a few years time. Yes, the Japan government could push all of its smaller automakers into Toyota or Honda’s fold, turning nine Japanese companies into the Big 2.5.

For its part, Fiat won’t be a survivor because 1.7 million units is about 30% of the annual production minimum based on what Mr. Marchionne is suggesting. Naturally, Ferrari and Alfa Romeo will live on in some form, but will the bland Fiat name survive beyond 2015? Probably not but neither will Proton, GAZ, Mahindra, UAZ and other names that most Americans aren’t familiar with.

What could be the biggest benefit of fewer players? Better made cars costing less money. With hundreds of millions even a billion or more dollars invested in bringing out new models, automakers can share platforms over many different brands that they control without “reinventing the wheel” each time. Then again we already have a term for this type of practice: badge engineering.

(Source: Reuters)