Guess who was matchmaker for Daimler’s three-way tie-up with Renault and Nissan? The Nikkei [sub] thinks it was Volkswagen. VW’s alliance with Suzuki “spooks Daimler into thinking small,” says the Tokyo business paper. And that’s quite a change for formerly bigthinking Daimler.
“We have to use the Franco-German alliance to revive our dismal compact car business,” said Daimler CEO Dieter Zetsche, who spearheaded the plan to combine the expertise of the two automakers.
Daimler’s small Smart has been a huge failure. In the 12 years Smart cars have been sold, 11 years ended with a loss. In 2009, the year of buying tiny (if at all,) annual Smart sales dropped18 percent. Daimler has considered selling off Smart several times. The attempts to sell the brand were even less successful than selling the cars.
And why isn’t Daimler calling it quits with the small fry? Says the Nikkei: “One reason is that Zetsche has grown increasingly wary of VW’s growing influence.” And so he should.
VW is way ahead of Daimler in emerging markets, such as China and Latin America, with its compact cars. Zetsche is especially afraid of Audi AG, a wholly owned subsidiary of VW. Audi is treading on Daimler’s turf, and they are making money. Audi achieved an operating profit margin of 5 percent in 2009, a year when you could not give away high-end cars. In the same year, Daimler’s passenger-car division suffered a loss of €500m, the whole company lost €2.6b. Audi just announced a record first quarter with worldwide sales climbing 26 percent.
Dr. Z. looks worriedly at the sales chart. Audi’s sales are steadily climbing, while Daimler is treading water. Audi sold 950,000 vehicles worldwide in 2009, and the plan is to sell .5 million in 2015.
Zetsche’s partner Ghosn also casts a very wary eye on VW. Renault lost €3.1b in 2009. The VW-Suzuki alliance did put the industry into speed-dating mode. Ghosn already indicated that he might want to entertain more partners than Renault, Nissan and Daimler.
Rumor has it that there might be more between BMW and PSA than building engines. And with all the coupling going on, nobody wants to end up as a wallflower. Nothing is spookier than being all alone.