Group grope

Daimler is taking a 12 percent stake in BAIC Motor and gets two two seats on the Board of Directors of BAIC Motor. Also as suspected, BAIC “will increase its stake in the production joint venture Beijing Benz Automotive Company (BBAC) by 1% to 51% and will thus be able to consolidate this joint venture within BAIC ahead of its IPO.”

At the stroke of a pen, the Beijing Benz JV and its full profits appear on the books of BAIC, thereby  multiplying the value of the stock.  At the same time, and taking a page out of GM’s golden share playbook,”Daimler will increase its stake in the integrated sales joint venture Beijing Mercedes-Benz Sales Service Co. by 1% to 51%.”

Daimler will pay 640 million euros ($869 million) for its stake in BAIC Motor, an investment that most likely will come back in spades once BAIC Motors is listed. “We will be the first non-Chinese manufacturer to take a stake in a Chinese OEM,” finance chief Bodo Uebber told Reuters.

Not exactly, says Reuters, noting that  “in 2009, German truckmaker MAN acquired a blocking minority in Chinese peer Sinotruk.”

PS: Having hurt enough feelings already, we steer clear of the traditional tie-up pictures, and show images of a man with a huge stach and scenes of heavy petting instead.

Now about those Benz-BAIC rumors: While Beijing is going gaga, Reuters has been suspiciously quiet about an upcoming deal between Daimler and its Chinese partner BAIC. Reuters, which has good ears and feet on the ground in China, had reported two weeks ago that something might be happening. Today, Reuters breaks its silence and says:

“Daimler will sign a deal in Germany on Friday to take a 10-20 percent stake in its Chinese partner, BAIC Group, China’s National Business Daily newspaper said on Thursday.

BAIC, which is planning to take its subsidiary, BAIC Motor, public in 2013 or 2014, will also increase its holding in its 50-50 venture with Daimler’s Mercedes-Benz to 51 percent, the newspaper said, citing unnamed people.”

As we had learned from to Saga of  GM’s Golden Share, a 51 percent majority allows a Chinese company to recognize the full profit of the entity. This should increase BAIC’s valuation immensely when BAIC goes public. It also promises to become a very good deal for Daimler:

Instead of selling the golden share for a lousy $80 million as GM did, Daimler gets a nice package of BAIC shares long before the offering. When BAIC goes public, Daimler’s holdings will multiply by virtue of the golden share.

Buying into a Chinese carmaker is an investment into growth and emerging markets. BAIC makes most of its volume building Mercedes and Hyundai cars in joint ventures.  By comparison, BAIC’s ventures into own brands remain insignificant.  BAIC can use a closer and more trusting relationship with a high-powered carmaker.

How do you beat the Dow? Occasionally, by reading TTAC. Yesterday, we wrote about Beijing rumors that Daimler and China’s BAIC are planning a big tie-up.

While we at TTAC are busy looking for the appropriate tie-up pictures, in case the rumor should prove true, the Dow Jones Newswire reports today:

“Daimler AG (DAI.XE) will on Friday sign an agreement with Beijing Automotive Group Co., known as BAIC Group, over a share swap deal, the Chinese internet portal Tencent News reported Wednesday.

Under the agreement, Daimler will take a stake of 10%-20% or even higher in BAIC Motor Co., a unit of China’s fifth-largest car maker BAIC Group, and BAIC Motor will raise its stake in Beijing Benz Automotive Co., its joint venture with Daimler, to 51% from 50%, the report said.

It is unclear how big a stake BAIC will take in the German luxury auto company, said the report.”

We are (somewhat) glad to see the Dow Jones Newswire devolve into quoting QQ as a source, because that’s what is lurhking behind “Tencent News”. We asked Tycho de Feyter, Editor in Chief of Beijing’s more reputable Carnewschina for his analysis, and he says after reading QQ and  auto.163.com:

 “Chinese media are reporting, quoting “informed sources”, that the Beijing Auto Industry Corporation (BAIC) and Daimler Benz will sign a ‘strategic cooperation agreement’ on February 1 in Germany. Details are scarce, but the sources say BAIC and Daimler will take an interest in each other, ranging somewhere from 10 to 20%.

In a directly related agreement: Daimler will sell 1% of its 50% share in the Beijing-Benz joint venture to BAIC. This clears the way for an IPO from BAIC on the Chinese stock market. Chinese regulations do not allow BAIC to count the joint venture as an asset if its stake is below 51%. The new equity-ratio will be 51%-49%. How much BAIC pays for the 1% is yet unclear.

In another related agreement: Beijing Auto, a subsidiary of BAIC, will be allowed the use the platform of the Mercedes-Benz E-class for a a furure Beijing Auto-branded luxury vehicle, which will very likely be based on the C90L Concept.  We heard the first rumors about this part of the story back in June last year.”

Tycho’s Qingdao competition, Ash Sutcliffe at Carnewschina, thinks what is in the works could be  that “three years after the Chrysler-Daimler split, Daimler are looking to their Chinese partner Beijing Auto to create a Renault-Nissan style alliance.” However, Ash, who know his sources, warns that the “reports are more rumor than actual fact at this stage.” This apart from the fact that Daimler already is part of a Renault-Nissan-Daimler alliance.

We reiterate the warning: Neither QQ nor 163 are known as the epitome of reliability, their youthful and underpaid, yet very creative writers are easy to flummox. Even more respectable Chinese publications can cook up an impressive spread of daily nonsense. We’ll see.

Gotta go and look for the a propos tie-up picture for the Friday story. How about this tasteful one? The white socks must be a German guy. No? Ok, I’ll look for more.

Hong Kong, and I speak from experience, is a great place to incorporate, to save taxes, and to throw a cloak of secrecy over financial operations which otherwise would be out in the open. In the case of GM, it is also a great place to save their Korean behinds. In December 2009, GM sold a 1% stake in its Shanghai-GM (SGM) joint venture to the Hong Kong part of its Chinese partner SAIC for the paltry sum of $85m. GM also put its India business into a Hong Kong based joint venture (HKJV). GM provided the India business, SAIC provided cash. As it turned out later, unearthed in Ed Niedermeyer’s seminal oeuvre about the mystery golden share, SAIC also underwrote a $400 million loan. In its darkest hour at the end of 2009, GM was kept afloat by the Chinese. Now, history seems to repeat itself in some convoluted way.

Also at the same time in 2009, the Korean Development Bank was trying to gain control of GM-Daewoo. That company, GM’s main source of low-cost, fuel-efficient car development, was in urgent need of cash which GM did not have. GM-DAT was kept in the GM fold after a $413m cash injection into its Korean subsidiary, only weeks before the Hong Kong deal. The money came from China via Hong Kong.

Three years later, GM is sitting on a taxpayer-enhanced $33 billion cash pile, and it seems to be time and opportune to use some to unwind some Asian positions. Again, the hub is Hong Kong. Last week, it became known that GM buys back most of the shares in is (Hong Kong held) India business for the again paltry sum of $125 million, leaving partner SAIC with a token 7 percent. On paper, this was a great deal. When GM put its India business into the HKJV, the business was, according to SEC filings, valued at $200 million. Now, most of it is coming back for $125 million. Not that SAIC would receive that money. GM did a capital raise, SAIC elected not to match it, and was diluted to 7 percent. It is surprising that SAIC would let control slip so easily. India is the world’s next growth market, with a capacity rivaling that of China. The Chinese car industry was effectively locked out of India, SAIC snuck in on GM’s coat tails. And now we are supposed to believe that SAIC walked away from that prize, after it had put in anywhere between $300 and $500 million in cash? Highly un-Chinese.

Be it $200 million or $125 million, the amounts are awfully low for Indian car plants with a capacity of more than 300,000 units per year. As a comparison: Tesla, a company that had nothing more than big ideas and a few prototypes of EVs of dubious value, could raise $226 million at the IPO. As another comparison: BMW budgets $260 million for a pocket-sized 30,000 unit plant in Brazil that does nothing more than assembling kits from Germany. These Indian numbers simply do not compute.

Remember Korea? As if on cue, Korea pops up after some strange Hong Kong transactions are settled. Over the weekend, Reuters reported that GM made an “informal offer” to the Korea Development Bank to buy back the 17 percent the bank holds in GM Korea. GM currently owns 77 percent. A price was not released.

How does this all fit together? We have no idea. However, we are sure it does.

And remember the famous golden share? In April, it was announced that GM would get the 1 percent share in its Chinese joint venture back, for a huge price: GM and SAIC established a sales company, SGMS. SAIC received a 51 percent majority control of the sales company. So far the theory. The reality, filed in the most recent 10-Q to the SEC, looks different. In the document, GM is listed as a 49 percent owner of SGMS. And it is still listed as a 49 percent owner of Shanghai General Motors (SGM). According to the SEC filing, SAIC has 51% both in the new sales company and the old joint venture.

Says The Nikkei [sub]:

“While many car companies are already in a fierce battle for a slice of the market for environmentally friendly vehicles such as hybrids and electric cars, they are also in the final stages of developing fuel-cell cars, which are widely expected to be the ultimate eco-cars because they emit no greenhouse gases such as carbon dioxide, or other pollutants.

Leading the charge in fuel-cell development are Toyota Motor Corp. , Honda Motor Co., General Motors Co. of the U.S. and Germany’s Daimler AG. The stakes are high, given the vast sums already spent.”

Roland Berger Strategy Consultants told the Tokyo wire that “the four automakers have already spent a combined 100 billion yen on the technology.” That would be a little over a billion $, and I believe that number is low.

Fuel cell research had been conducted since the last millennium. The 2008 financial crisis slowed it down. Carmakers had to cut R&D even on regular cars. Recently, development revved up again.

Prototypes and test vehicles have been driving around for years without exploding. 2015 is the date several carmakers name for the first commercial launch of fuel cell vehicles. Satoshi Ogiso, Toyota’s man in charge of new technology, thinks that the only challenge is affordability.  During an interview with TTAC last year, he likened the challenge to what had faced him during the launch of the first hybrids in 1995.

Just like hybrid powertrains in the 90s, current fuel cell powertrains are big, bulky, heavy and expensive. Ogiso and his colleagues at other carmakers are working on the problem.

The solution to many ills in the auto industry is scale: Make and sell enough cars with the new technology, and you can spread the price of development over many units. Also, with mass production, the price of components can come down drastically.

Even the largest automakers don’t want to wait until they achieved the necessary scale effects themselves. They forge alliances with other automakers.

• Toyota, usually a company that does it alone and in-house, famously entered an alliance with BMW.
• Nissan and Renault agreed with Daimler to expand the scope of their cooperation to fuel-cell cars.
• Honda appears to be partner-less.
• GM negotiated a fuel cell partnership with BMW. The Bavarians broke off the discussion and are winding down a new energy alliance with GM partner PSA after hooking up with Toyota.

Says The Nikkei:

“One GM executive who has worked on the automaker’s fuel-cell effort for a long time lamented being handed another setback by Toyota.”

Observers familiar with the matter expect more tie-ups. The Roland Berger consultancy predicts that Toyota will enlarge its circle of fuel cell partners.

It will be a few years until fuel cell cars can compete in the marketplace. In the meantime, there is a fierce and sometimes uncivil competition for government grants.

When the U.S. government did bet heavily on EVs in 2009 and decided to shift funding away from fuel cell vehicle research, Secretary of Energy Steven Chu said that fuel cell vehicles “will not be practical over the next 10 to 20 years.” In the meantime, he had a change of heart.

“The development of America’s tremendous shale gas resources is also helping to reduce the costs of producing hydrogen and operating hydrogen fuel cells,” Bill Gibbons, a spokesman for the department, told the New York Times in May.

If an investment into fuel cell vehicles would be successful at last, past investments into EVs would not go to waste. A fuel cell is just another battery. Except that it can be charged in minutes than hours, and except that it lasts 400 miles instead of 100.

Toyota is far ahead with the technology. The company had Fuel Cell Hybrid Vehicles (FCHV) on the roads for ten years. In 2009, it “launched” its FCHV-adv, basically a Highlander with the hybrid synergy drive from the Toyota Prius connected to a 90kW fuel cell stack. A few months ago, editor-at-large Ed Niedermeyer and I had it on a short test ride through the scenic warehouse landscape of Torrance, CA. Except for an eerily quiet drive, the ride was uneventful.

On a full tank of – this time real – gas, we could have taken it all the way to San Francisco and beyond – no range anxiety here. Fuel cell vehicles have all the advantages of a battery-operated vehicle, i.e. no emissions (the fuel stack produces water), and nearly none of its drawbacks.

If you want to drive tailpipe emission free, your choices are battery, or fuel cell. A fuel cell is basically a battery. Fuel cells and batteries use a chemical reaction to make electricity. When the chemicals in a battery are depleted, you must recharge or throw away the battery. The chemicals of a fuel cell are hydrogen and oxygen. You provide the hydrogen. The fuel cell stack uses free-of-charge oxygen from the air and produces electricity plus H2O – water. Proponents of the technology say that well-to-wheel, fuel cells involve much lower emissions than batteries. Refilling the hydrogen tank should not take longer than filling up with unleaded. Next stop after 400+ miles.

The only way to extend the range of a BEV (if you don’t want to add an ICE) is by adding more batteries. This quickly becomes an exercise in futility. Each added battery cell means more weight, heavier brakes, a larger traction motor, a stronger body to carry the mass, and in turn even more batteries. And most of all, it becomes insanely expensive.

Not so with fuel cells. Fuel cells can make electricity at weights that are between eight to 14 times less than current batteries. Extending the range of a fuel cell vehicle has negligible impact on its weight.

Like electricity, hydrogen is not a way to make energy, it is a way to transport energy. Hydrogen can be made in the same number of ways as electricity.

And why aren’t we all driving around in fuel cell vehicles by now? There were a number of technical challenges, but as Toyota Chief Engineer Satoshi Ogiso had told us last year, the challenges have all been mastered. The only real problem Ogiso is facing with hydrogen fuel cell vehicles is money:

“For us, the only remaining real issue that stands in the way of fuel cell electric vehicles is mass production cost.”

Current fuel cell technology is big, bulky, heavy and expensive. With enough scale, package size and price can come down considerably. Toyota plans to launch a commercial FCV in 2015. It still will be expensive, the Nikkei figures 5 million yen, or $62,000. By 2020, Ogiso plans to have an affordable FCV.

Luxury vehicles are much better for early-tech alternative propulsion, because the cars are big enough to hide the heft and expensive enough to mask the price. With their alliance, Toyota and BMW plan to “take the lead in commercializing fuel cell cars,” as The Nikkei [sub] writes. Says The Nikkei:

“Other automakers are forging ties over green technologies. Daimler AG is rushing to develop a fuel cell car with capital partner Nissan Motor Co. Meanwhile, Honda Motor Co. and Hyundai Motor Co. are developing fuel cell cars on their own. General Motors Co. has been considering a fuel cell tie-up with BMW, but it may have to change course now that the German firm has opted to partner with Toyota.”

Here some background on the GM/Isuzu tie-up. Japanese wire services such as The Nikkei [sub] and Jiji report that GM approached  Isuzu and “informally proposed acquiring a stake” in the Japanese truck maker. The source is an unnamed executive of Isuzu.

According to The Nikkei [sub], GM and Isuzu will start negotiations in early May for a roughly 10 percent share. If the negotiations are successful, Isuzu President Susumu Hosoi and GM CEO Dan Akerson could meet this summer to sign the agreement.

Holding a 9.2 percent share, Japanese trading house Mitsubishi is the largest shareholder of Isuzu. If the talks are successful, that title will pass to GM.

Isuzu and GM go a long way back. In 1971, General Motors purchased a 34.2 percent share of Isuzu. Isuzu’s KB pickup truck was sold through GM dealerships in the United States beginning in 1972. More light trucks were added.  Isuzu also produced the luckless  Chevrolet LUV  from 1972  through 1982.

In 1974, Isuzu built the Opel Kadett under the Isuzu nameplate as the Bellett Gemini. In 1976 GM imported the Gemini into the United States as the Buick Opel. Few knew that the German car, sold through GM dealerships, was actually manufactured in Japan.

In 1999, GM had 49 percent of the company, effectively gaining control of the company. One of GM’s strategic planners, Donald T. Sullivan, was installed as executive vice-president of operations. No Japanese manufacturer had ever involved a non-Japanese speaking manager in such a high position before.

Shortly thereafter, the romance began to sour. In 2002, Isuzu started to buy back its shares from an increasingly cash-strapped GM, reducing GM’s 49 percent share to 12 percent.

Then, things get a little murky. The official history timelines are mum in regards to GM’s final disengagement. “Due to financial difficulties, the United States’ GM sold its 7.9 percent stake in Isuzu in 2006,” says the Yomiuri Shimbun. Shortly thereafter, Toyota bought a 5.9 percent share in Isuzu.

Isuzu will have to evaluate GM’s advances carefully, because a lot is at risk, and there is more than one knot that needs to be untied. “A reforging of ties between the two could trigger a response from Toyota,” says the Nikkei. Translation: Toyota will most likely dump the stock. Isuzu will also end capital tie-up talks with Volkswagen . According to Japanese media, Isuzu still hopes to supply pickup trucks to Volkswagen in Thailand, where they will be sold as VWs.

Judging from the high-level leaks to sympathetic Japanese business wires, some executives at Isuzu might not be too excited about the rekindling of the romance. As part of its default, GM has stiffed Isuzu with bills of $1.7 billion, some people say. As it turns out, the on-line sources confused  1.7 billion dollars with 1.65 billion Japanese yen ($20 million.)

Coda Automotive, a Southern California start-up that assembles EVs with Chinese components, announced at today’s Beijing Auto Show that it would partner with the Chinese OEM Great Wall to develop a new, lower-cost EV. Says Coda CEO Phil Murtaugh (who you might remember as a key character in American Wheels, Chinese Roads) explains in a press release

We’re excited to work with Great Wall Motors to develop the second product in Coda’s portfolio, to bring another solution to a global problem and together make high-quality clean technology accessible. Ultimately, this will enable drivers worldwide to go electric affordably and support our mission of putting an EV in everyone’s garage.

Coda’s first product exemplifies the challenges facing the EV startup: namely a high MSRP (starting price $38,145) for a product that doesn’t quite meet competitive standards for the US. Great Wall may not bring a vast improvement in quality to the partnership (although it was the first Chinese OEM to pass European Whole Vehicle Type Approval), but it should be able to help Coda offer a more affordable EV to the US market. The new vehicle will be jointly developed, with Coda taking the lead on the EV powertrain development and final assembly, and GW manufacturing gliders at its plant in Baoding.

Meanwhile, plenty of questions remain. Will lower costs help Coda battle its way out of a brutally niche positioning? Will even cheaper Chinese vehicles meet American-market expectations? Will new product even make a difference to Coda, considering its dealer net is currently only four stores strong? Bertel and I will be meeting with Coda while we’re in the Los Angeles area this week, and we’ll be sure to bring you more details on its alliance with Great Wall as they become available.

France’s President Nicolas Sarkozy rode to the rescue of embattled TTAC, and confirmed the tie-up.

Sarkozy told La Voix du Nord that the Sevelnord facility was likely to be saved by the new partnership, says Reuters:

“Sevelnord will be OK. My understanding is that there’s a deal in discussion with Toyota for light commercial vehicles.”

Toyota and Peugeot declined to comment.

This is a hot potato in many ways.

• It is known that the European car industry must shed capacity, but no statesman wants it in his country or on his watch.
• PSA’s EU sales were down 19.4 percent in March and 17.3 percent for the quarter. It is likely to get worse. PSA sells, mortgages, and rents out whatever it can find.
• PSA’s new partner and Toyota’s arch nemesis GM has its own problems in Europe. GM Group sales are down 12.3 percent in the region, and there is no immediate end to Opel’s bloodletting.
• The unions are eager to make feared plant closures a central topic of France’s presidential election campaign, which will enter a second round of voting on May 6.
• Sarkozy is trailing Socialist challenger Francois Hollande in opinion polls.

Sound familiar?

And with the tie-up confirmed, the pictures will continue.

Following the many inter-company alliances and dalliances is becoming as cumbersome as covering the couplings in a swing club. PSA Peugeot Citroen is said to be in talks with Toyota. The same PSA that just hooked up with GM is reportedly talking tie-up with GM’s arch nemesis Toyota. They discuss sharing PSA’s Sevelnord plant in northern France, where PSA’s erstwhile partner Fiat pulls out. Still with me?

The rumor has been planted by the French wire service AFP, which has it from the usual source close to the matter. French union official Ludovic Bouvier only wants to confirm that the talks “are with an Asian group.”

Peugeot has had a partnership with Toyota in the Czech Republic since 2002. Fiat is to leave Sevelnord in 2017. PSA has an alliance with BMW. BMW on the other hand also has an alliance with Toyota. Still with me?

With the government still waiting to see how much it will get out of its equity in General Motors, The General seems to be attracting more of the media commentary than Chrysler these days. And not without good reason: GM saw the greatest drop in market share last month of any Detroit automaker, its government-hyped Volt is flopping, Opel continues to be an open sore and it can’t help but flaunt its cluelessness about youth marketing. But interest in GM’s shortcomings seems to be driven by little more than election-year political implications, which Chrysler was able to avoid by borrowing cash and misleadingly claiming to have squared up with the American taxpayer. After all, Chrysler is facing just as many challenges as GM, if not more. And despite having formally closed the bailout chapter of its history, Chrysler’s performance still bears on the decision to rescue America’s weakest major automaker.

Evidence that Chrysler is receiving something of a free pass from the media is not difficult to find, with Sunday’s CBS interview with CEO Sergio Marchionne serving as Exhibit A. A fluffy profile of the Fiat/Chrysler boss, the CBS piece is so lacking in journalistic rigor that ends up providing more misinformation than verifiable facts. The “paid back the loans with interest” line makes an appearance, without any qualifications that might have explained the full truth of Chrysler’s “payback.” Another straight-up whopper: Sergio’s assessment that Chrysler can “afford” to screw up on a single car. Chrysler only has one new post-Fiat car on the immediate horizon, the 2013 Dodge Dart… if Chrysler has “screwed up” that car, it will be a PR disaster that the company might not survive. Besides, with Fiat 500s piling up on dealer lots (82 days supply as of 3/1, down from 132 days supply on 2/1) despite $500 rebates or 0% financing, it seems that Fiat/Chrysler has already used up the one “screw up” that Marchionne says it can afford.

Speaking of the Dart, Marchionne claims that the crucial compact is “mechanically outstanding” and has “nothing to apologize for”… and yet, it appears that it’s already facing some challenges. Earlier this month, Marchionne said he was bumping the Dart’s rollout from April 1 to “avoid being jinxed” by April Fool’s day (Allpar notes that the April 1 launch was a “delay” from the planned January launch). That excuse is flimsy on face value, but the fact that Mopar will only build 2,000 Darts in May and that full dealer availability won’t finalize until June shows that there are probably bigger problems under the surface than mere superstition. And Dodge boss Reid Bigland seems to already be turning down the wick on expectations, saying the delay is

“not a concern. Given the size of the segment throughout North America and the enthusiasm for the Dart, we think it’s going to go OK.”

What Bigland leaves out is that, although the segment is large, the competition among compact sedans is fierce. And the Dart is likely not as well-positioned as CBS implies when it claims its “base price just under $16,000 with 40 miles to the gallon.” The EPA doesn’t have fuel economy numbers for the Dart, but with an efficient 1.4 Turbo engine listed as an option, it seems highly unlikely that a 40 MPG highway version of the Dart will be available at the base price (at least until a 9-speed transmission becomes available next year). Oh, and the government’s condition that Fiat build a 40 MPG Chrysler only requires 40 MPG combined unadjusted, a benchmark that is far less than 40 MPG EPA, and barely competitive with compact sedans already on the market. And with only 120,000 or so units of production planned at Belvidere, and exports planned from there to 40 different markets, it seems that Chrysler isn’t banking on competitive sales figures (Focus and Cruze have been selling over 20k units per month).

But if you dig deeper, you find that the mainstream media’s breathless boosterism is sharply contradicted in the online press, where rumors of trouble in Auburn Hills are starting to pile up. Over at Autoextremist, the auto industry insider’s outsider is posting emails from sources like “Anonymous in Auburn Hills,” which indicate that there are either a few truly bad apples at Chrysler or (as the Autoextremist himself concludes) the Fiat-Chrysler marriage is facing serious issues. “Anonymous” writes

All you need to do is work at CTC [Chrysler Technical Center] and you will see just how correct AE [Autoextremist] is on this Fiat issue.

In that building resides a morass of poor decisions, poor planning, poor time management, and ass backwards 80′s era engineering think…

…They want to build good cars but can’t make a decision to save their live.

My God, they can’t even get their CAD system figured out! I mean who is stupid enough to introduce a new CAD system on a whim?? did they not think you need time to integrate all of the other computer related systems?

It is a joke of epic proportions.

Another AE reader adds:

Arrogant. Irrational. Belligerent. Such a perfect description of Fiat management, [Autoextremist] must be moonlighting within the walls of CTC somewhere…

…Fiat practices finger-snap management as its true core philosophy. Cut product development time in half! How? Just cut it in half, easy! What testing should be eliminated? What efficiencies should/will allow this? No answer. Build a new production line but with half the capital funding! How? Easy, just spend half as much! You get the picture.

In an industry that so closely controls its PR, this burst of leaks is evidence enough that some serious dissatisfaction is brewing at Fiat/Chrysler. Add the Dart’s delay to this, and the emerging picture at Chrysler is not of a company bound for great things. More troubling still is the counterpoint between these worrying signs and the dizzying ambition of Fiat/Chrysler’s new product development plans. The Dart is built on a widened version of Fiat’s C-EVO platform, but according to Allpar, that platform will be stretched further and converted to rear-drive to accommodate the forthcoming midsized Alfa Giulia and Dodge Avenger replacement. Oh, and the LX platform also has a front/rear-drive replacement under development as well, the E-EVO, which will underpin everything from minivans to an Alfa sports sedan. According to an Allpar source,

This new D architecture is a joint project, but it’s being developed in Detroit with Fiat engineers who have been flown over to be embedded permanently in the project. … This decision (having a RWD D-segment architecture) was a costly proposition, and they took a good two years of tinkering between finance and marketing before they finally reached the decision to go ahead with this. … E-Evo was discarded [for this purpose] last year, when it became obvious that if you shorten it too much you can’t produce an aerodynamic, sexy looking D-segment car, on that huge beast.

So, an apparently-dysfunctional, trans-Atlantic team is developing expensive, complex D- and an E-segment platforms that are convertible between front-drive, rear-drive and all-wheel-drive, and will underpin mass-market offerings as well as premium cars. If this sounds oddly familiar, it should: it’s like a worst-of mashup of the cross-cultural issues of the DCX days and the engineering overreach of the early LH platform development (which Bob Lutz describes as having been “trapped in the classical ‘more is more’ planning maze”). And at the root of this mind-boggling complexity is yet another unsolved issue: Fiat/Chrysler’s bloated brand portfolio, which demands this ultimate (and expensive) platform flexibility.

Meanwhile, the context for all this is even worse, as Fiat faces a crushing downturn in the European market, made worse by the fact that Fiat is dependent on the Mediterranean markets that are being hit the hardest. Fiat lost half a billion dollars last year, its stock is on a 12-month downward spiral, it has frozen European investments, and it is grappling with numerous union issues (including a hauler strike that could cost it 10% market share in Italy). And with essentially no presence in China to offset European contraction, Marchionne’s solution is another alliance with yet another struggling automaker, like Mazda or Suzuki. But the “tying two rocks together to see if they float” plan clearly isn’t a path forward, and more merging will only wreak further havoc on Fiat/Chrysler’s troubled culture. Meanwhile, Fiat is only just starting [sub] its third attempt at a Chinese production JV (building Fiat-branded Darts), and it’s moving into Russia just as that market’s growth slows.

With huge losses likely to come out of Europe, and giant outlays likely on both Chinese and Russian expansion as well as investments in complex, multi-purpose platforms, Fiat-Chrysler has a seriously tough row to hoe over the next year or so. Successes will have to come from its stronghold in Brazil, which is seeing disappointing sales numbers so far this year, or from the US. With only the Dart coming down the pike, one hopes that its delays yielded serious results and that it makes an unequivocal case for Chrysler’s Fiat-led future. Otherwise, we could easily find ourselves here a year from now, wondering once again if Fiat/Chrysler is going to make it through another 12 months.

Hear that chafing sound? It is analysts scratching their heads. They wonder why in the world would GM buy 7 percent of France’s PSA Peugeot Citroen. Bloomberg says this is about to happen. Neither GM nor PSA wants to confirm the deal. However, Bloomberg already has intricate details of the planned transaction, someone seems to be talking on deep dark background. Sounds like the odd couple is about to do it.

The question remains: Why? Analysts are hard pressed to come up with a logical reason for a tie-up. The biggest problem of both: Too many workers, too many factories, not enough sales. LMC Automotive in Oxford, UK, puts the capacity utilization of PSA’s European plants at 62 percent, and that of Opel at 74 percent. Traditional industry benchmarks require capacity utilization of better than 80 percent as a prerequisite of profitable production. An alliance between two ailing businesses does not produce a healthy one. Car consultant Maryann Keller told Bloomberg: “What in the world do you get by buying a tiny stake of a French company where you could never lay anybody off or close a factory?”

GM lost $747 million in Europe in 2011, where losing money has a great tradition for the General. It is GM’s 12^th annual loss in a row. So far, GM has lost $12.4 billion in Europe, and there is no end in sight.

PSA’s track record is less bleak. Europe’s second largest car company made money in 2010, lost money in 2009, made money in 2008. Recently, PSA has been engaged in a frenzied sell-off of assets. It looks like they are raising money in a hurry.

Both are looking at a Europe that is about to contract. PSA is heavily exposed to the troubled Mediterranean parts of Europe. Both have been hemorrhaging market share in Europe.

All kinds of reasons are being presented for the alliance that just won’t make sense: Diesel engines, light commercials, joint sourcing of parts. None of these create the desired slap the forehead effect. I guess we’ll get a convincing reason if the deal indeed goes ahead.

Any better ideas, Best & Brightest?

Renault-Nissan announced today in Detroit that its Decherd, Tenn., plant will build Mercedes-Benz 4-cylinder engines for Infiniti and Mercedes-Benz starting in 2014.

Read this sentence carefully.

Nissan will build engines designed by Mercedes Benz. The engines will be used in Infiniti cars. And they will be used by Mercedes-Benz. It is the first time that Merc. engines will be built in the NAFTA. That first happens in a Nissan plant. That’s more than a marriage, that’s an orgy between two. Well, three.

Production will begin in 2014, with installed capacity of 250,000 units per year once full ramp–up is achieved.

Mercedes will be using the engines starting in 2014 in C-Class cars, built at Daimler’s vehicle plant in Tuscaloosa, Ala.

The complete project announced last September amazingly is still on track:

• Joint smart/Twingo architecture still underpins cars launched by Renault and Daimler in the first quarter of 2014. Two-seater smart vehicles will be produced at Daimler’s plant in Hambach, France, and four-seater smart and Renault production are slated for Renault’s plant in Novo Mesto, Slovenia.
• A new entry-level city van for Mercedes-Benz is on schedule with launch planned late 2012. The Mercedes van will be made at Renault’s plant in Maubeuge, France.
• The cross-supply of power trains intensifies.  The Alliance is supplying Daimler with compact three-cylinder gasoline engines to be used in smart and Twingo vehicles and four-cylinder diesel engines to be used in the jointly developed light commercial vehicle and in Mercedes-Benz’s compact cars. Daimler will supply Nissan and Infiniti with four- and six-cylinder gasoline and diesel engines and automatic transmissions.
• Infiniti plans to base a premium compact vehicle on the Mercedes compact-car architecture, starting in 2014.
• Daimler will provide batteries from its production facility in Kamenz, Germany, and Renault-Nissan will provide electric motors for the use in the jointly developed EV versions of the smart and Twingo. Those are expected in 2014.

Lotus is one of those brands that every auto enthusiast loved to lionize, despite (or possibly because of) the fact that it hasn’t made a profit for its owner, Proton, in 15 years. But now things are changing. Lotus itself is in the midst of a makeover, seeking to transition from niche sports- and track-car company to a Ferrari and Porsche-rivaling aspirational brand. Meanwhile, back in Malaysia, its owner, Proton, is undergoing a few changes itself. Having been founded as a state-backed business, Proton may soon be privatized, reports Bloomberg. And as a result, Protons private investors could push for a quick divestment of the firm’s Lotus holdings. One such investor, Gan Eng Peng of HwangDBS Investment Management, tells Bloomberg

It will make sense for them to sell it. Proton and Lotus are not a good fit. They are in different market segments, both in terms of geography and product.

Chinese automaker SAIC and Genii Capital have been rumored as possible buyers, although Proton denies all rumors that Lotus is for sale. The problem is that Lotus won’t be worth much until 2014, the brand’s earliest projected break-even date. And even then, Bloomberg’s analysis shows that Lotus’s highest possible value then still wouldn’t be enough to return Proton to profitability, in light of increased competition in its home market of Malaysia. But in the meantime, Proton has no (useful) synergies with Lotus, and as the automaker emerges from the warm embrace of government ownership into the harsh light of the global market, it seems that selling off Lotus may be unavoidable.

Which leads to an interesting question: which automaker seems most likely to buy up Lotus? My money is on VW, who might buy the brand for no other reason than to kill off Alfa, after Fiat refused to sell. Of course, then it might create branding challenges with Porsche, but Alfa would have done so anyway. Another possible buyer: Toyota, which supplied Lotus with engines for years. In any case, we can probably count GM out of the picture, after their abortive relationship with the British brand.

Fuelled by Nissan’s decision to move the HQ of it’s Infiniti brand to Hong Kong, rumors of an impending  Chinese production of the upscale marque would not end. In November, while not denying the story out of hand, spokespeople in Yokohama indicated that announcements of Chinese production of Nissan’s luxury brand were premature. Today, China Daily has an interesting twist on the story:  A trucks-for-luxury cars swap.

Citing a Chinese Newspaper, China Daily writes:

“As part of the plan, Nissan Motor, which makes commercial vehicles and passenger cars in a 50-50 partnership with Dongfeng, would stop making medium-to-heavy duty trucks at the venture, the Economic Observer said on its website, without identifying the source. Dongfeng would in turn back an option to make Infiniti as well as Renault cars at its existing venture with Nissan, it said.”

China Daily was unable to receive confirmation for the unusual trade-in.

Given a cooperative Dongfeng, Nissan should have no problem making high quality Infinitis in China. After all, if BMW, Daimler and Audi can do it, why not Nissan? In July, Carlos Ghosn had declared in Beijing:

“In addition to China being home to the largest volume facilities in the Alliance, it is also home to the best performing plants. Based on our global ranking system that measures quality of production and products, our plants in Huadu and Xiangyang rank first and second against 34 other plants in the Alliance.”

Dongfeng is owned by China’s central government. In the luxury sector government sales are key in China. But why the swap? A foreign company may only have two joint ventures in China. For a Chinese company, there is no limit to its promiscuity. In addition to Nissan, Dongfeng already has JVs with Kia, Honda, Renault’s rival PSA, and more. Why not simply add Volvo?

Update: On further checking, Reuters had reported a week ago that Volvo and Dongfeng plan a JV, and that Nissan would pull out of their current truck JV with Dongfeng. We don’t follow trucks. The only new wrinkle is that Infinitis and Renaults will be made.  Renault and Dongfeng have been together for years. The Infiniti story is months old. Book it as another Chinese fire-drill in a country with more than 100 carmakers.

Update to the update: Reliable contacts at Infiniti HQ in (still) Yokohama confirm that no deal has been struck (yet) for Infiniti production in China. They have no knowledge of the swap described in Chinese media.

This is both an interesting and a strange article the The Nikkei [sub] has on GM. First, the interesting part.

While commenting on the fact that GM will jointly develop carbon fiber automobile components with Tokyo-based Teijin, The Nikkei detects a “radical shift in the U.S. auto giant’s business strategy.” The paper comments that GM was once known for its insistence on developing its own technologies. Which, says The Nikkei, played a part in the company’s downfall, because it drove up costs.

“But since emerging from bankruptcy in 2009, GM has shown a willingness to work with companies across industries to develop green technologies.

GM agreed with South Korea’s LG Group in August to jointly develop electric vehicles, expanding on previous agreements to procure batteries and work together on electrical systems.

In September, the U.S. automaker signed another electric-vehicle cooperation agreement, this time with China’s SAIC Motor Corp.

Furthermore, GM has a tie-up accord in battery technology with U.S. start-up A123 Systems Inc.”

So far, so good. Ok, so we get it that GM is getting over the “not invented here” thing and reaches out to other partners. This has been going for a while in the whole industry, and is picking up pace. The costs and challenges are simply too great to shoulder alone, the payback too far out.

What is slightly odd is The Nikkei’s conclusion:

“As it moves to tap the strengths of partners around the world, GM may become a major rival of Japanese automakers even in the field of green vehicles.”

Does that mean that Japan’s leading business daily is giving GM no green-cred for past and current work?  Does The Nikkei think that Japanese makers hold an exclusive on green cars?

Yesterday, first media day at the Tokyo Motor Show, the press corps was chased from press conference to press conference in 15 minute intervals. Today, the Fourth Estate was looking forward to lazy strolls through the halls, snapping pictures of attractive ladies cars, when an urgent email, followed by urgent telephone calls disturbed the peace: Come to the Grand Pacific Le Daiba at 4pm, when Toyota and BMW will hold a joint press conference. The local gang knows: When these short notice calls come, drop everything and show up, it will be interesting.

Toyota AND BMW? Let’s go!

The Tokyo Motor Show was instantly sucked empty, and hundreds of journalists packed the hotel’s ballroom.  Klaus Draeger, Development Chief at BMW, announced “a long-term technological partnership” between the Bavarian Motor Works and (officially, still) the world’s largest automaker. In the beginning, it will only be development of lithium ion battery cell technologies (where Toyota is leading) and the supply of BMW’s clean diesel engines to Toyota (which they need for the hybrid-skeptic European market). However, “the two companies have agreed to ongoing discussions as a way to identify other possible collaborative projects.”

Is it just a battery and diesel engine deal? It doesn’t look like it. Today, we hear that BMW and Toyota had been exchanging notes for quite a while in secret, and took a liking to each other. The engineers work well together, despite Bavarian on one and Japanese on the other side they “speak the same language.” There is mutual admiration for the partner’s engineering prowess. Said Draeger:

“It clearly makes sense for experienced innovative companies to pool their expertise and power with such future orientated technologies. Toyota and the BMW Group are perfect partners. Toyota is the most sustainable and experienced producer in the high volume segment. The BMW Group is the most innovative and sustainable producer in the premium segment. The Toyota Motor Corporation and the BMW Group are two powerful, engineering-driven and innovative companies. And we are absolutely certain that together, we will take the future of mobility another decisive step forward.”

Does that sound like only batteries and diesel engines?

Draeger was followed by  Toyota’s Exec VP Takeshi Uchiyamada. Hey stayed a bit longer to the battery and diesel script, but eventually said:

“We would like to discuss other possible collaborative projects. We have always thought ther is a lot to learn from Europe’s automotive culture and from the European tradition of automotive engineering. BMW is a premium brad that represents that culture and tradition. We hope to learn a great deal through the mid- to longterm collaboration.”

Does that sound like only batteries and diesel engines?

But wait, doesn’t BMW have a new energy collaboration with France’s PSA? When asked, Draeger has a somewhat unconvincing answer:

“The agreement we hat signed with PSA is about developing and producing today’s technology for the cars of tomorrow, meaning we are developing electric motors, we are developing electric control units and we are also developing batteries, but based on lithium ion cells which currently exist. There is a clear difference between the joint venture with PSA and the area we are entering with our memorandum of Understanding.”

Uchiyamada is asked whether any shares could change hands. A moment of silence and glances to the other men on the podium. Then:

“Currently, mutually investing and partner shares are not something that we have in mind. If we may think that going beyond this is a sensible approach, we may think about that in the future.”

No, this doesn’t sound like a battery and diesel engine deal only. The podium was filled with board members of both companies. Any higher, and CEOs would be announcing nuptials. As explained in our interviews with Toyota’s Chief Engineer Satoshi Ogiso, the future brings high demands on expensive multitrack research with no immediate payback. Premium brands are best to market these technologies, because they will be expensive in the beginning, a fact that is better camouflaged in a car that is expensive anyway. However, to bring the price down, you need scale. You need the raw millions of cars of volume makers. Renault/Nissan has partnered with Daimler Benz, ad Toyota seems to do the same with BMW. Both Renault/Nissan and Toyota are great admirers of the current success of the Germans in the premium segment, and are very much for friends with benefits.

In the morning before the press conference, Klaus Fröhlich, Strategy SVP at BMW and resident chief ideologue, took a stroll across the Toyota display  with Takeshi Uchiyamada. Fröhlich seemed to like what he saw, and both exuded oodles of good chemistry.

It is a safe assumption that this battery/diesel engine deal is a test whether the great chemistry and mutual admiration have staying power. If they do, expect a further cozying up. Volkswagen and Suzuki did not work, because money changed hands first and jointness was to follow. Both Nissan/Renault and Toyota start their cooperation with cooperation.

Suzuki has made good on its repeated threats to sue Volkswagen. The Japanese carmaker initiated arbitration procedures. This according to Reuters, The Nikkei [sub], and sundry other media that has been covering the domestic  dispute between the couple.  Suzuki originally had given Volkswagen some time to consider and was planning for a repurchase of the 19.9 percent Suzuki shares held by Volkswagen. After Volkswagen CEO Martin Winterkorn denied the offer out of hand, and implicitly said that he was waiting for Osamu Suzuki to be replaced by younger blood, Suzuki said “mo takusan desu” (enough is enough) and filed papers with the International Chamber of Commerce International Court of Arbitration in London. Don’t expect a quick end of the drama.

Yasuhito Harayama, Suzuki’s executive vice president, and widely suspected as the driving force behind the divorce proceedings, had said last Friday that it might take up to two years to settle the dispute.

Volkswagen told The Nikkei [sub] that “it can’t follow the logic behind Suzuki Motor Corp.’s move to commence arbitration proceedings aimed at compelling Volkswagen to dispose of its shares in Suzuki.” Volkswagen probably used “nicht nachvollziehbar” (incomprehensible), which is a politically correct way of saying that the other side lost its marbles.

The last attempt at saving Saab failed when GM said it would not supply or license technology to Saab if it were 100% owned by PangDa and Youngman, scuttling the Chinese firms’ bid for outright control of the company. Now the two firms have sent a revised proposal to The General in hopes that they can provide safeguards for intellectual property, allowing them to purchase Saab without losing the link to GM. After all, both the 9-3 and 9-5 rely on GM technology and parts, while the 9-4X is wholly supplied by GM. Rachel Pang of PangDa tells TTELA.se

We have not discussed any changes with regard to ownership structure. We are concentrated on the GM issue… It’s about more commercial terms.  We want to meet them and have asked for a meeting. First we must give them time to review our proposal. We are waiting for GM’s response and then we will of course respect it.

Of course, our understanding is that “the GM issue” is the same as the ownership structure issue… and keep in mind, PangDa and Youngman are looking for a meeting, not an agreement from GM. Which means this could drag on a while… and wouldn’t you know it, it’s time for Saab to pay salaries again.

Victor Muller, who TTELA says “has increasingly fallen into the background” of negotiations, agrees that it could be a while, noting

GM will first need to digest the information gained from Saab. It is up to Youngman and Pang Da which they want to conduct the negotiations with GM

And while PangDa/Youngman are waiting to hear back from the RenCen, they’ve got to keep the cash flowing. Apparently Youngman injected some $3m into Saab this week, and PangDa could help out with wages, which must be paid at the end of this week. Which raises an interesting question: why are PangDa and Youngman continuing to inject cash into a company they may never be able to own? Surely not because GM has sent promising signals, as its last message was

We have not changed our point of view. We are not negotiating with the Chinese since our contracts are with Saab

When asked about this puzzling state of affairs, Rachel Pang gave an answer that definitely gains something in  the Google Translation

TT: Why do you continue to invest in Saab when you do not know if you can buy the company?

- A good question. I do not know what I should be on it at the moment, says Rachel Pang. (Original: En bra fråga. Jag vet inte vad jag ska vara på den i nuläget, säger Rachel Pang.)

I’m sure Ms Pang’s answer must have been more reasonable than this appears, but then, every time I dig back into the Saab story, I tend to not know what I should be on at that moment. A stiff drink? Painkillers? Some kind of exotic hallucinogen, synthesized from the pancreas of Amazonian salamanders? What could possibly make me understand the point of all this burning capital? At this point, I’m almost considering tucking into the barbiturate overdose-in-applesauce that Guy Lofalk is keeping warm for Saab.  This story is a killer.

That interview with Volkswagen CEO Martin Winterkorn is a treasure-trove of information. It also gives an insight into Volkswagen’s strategy with rambunctious Suzuki: It will be a Sitzkrieg.  Volkswagen seems to be intent on waiting things out until Osamu Suzuki passes away.

Winterkorn will be at the Tokyo Motor Show. Someone with a perverse bent made Volkswagen (booths EP06 through EP10) close neighbors of Suzuki (EP12). Only Mitsubishi (EP11) keeps the brawling couple at distance. But Winterkorn doesn’t have Osamu Suzuki on his dance card:

“A meeting is not planned. Should we run into each other, then we can talk about everything. There is one exception: Our 19.9 percent share is not for sale.”

Asked how Winterkorn intends to settle the matter, he answers:

“We have a lot of patience. Our targets are long-term. If the current management team at Suzuki doesn’t want to work with us, then maybe the next generation may want to.”

We had picked-up rumors long ago that Volkswagen may be counting on the – as the saying goes in Wolfsburg –  “biological solution”.  Suzuki’s Chairman Osamu Suzuki is 81, a full seven years older than Ferdinand Piech.

That’s a risky bet. Japanese tend to live a long life. And in any case, the instigator behind the row is said to be Suzuki Executive Vice President Yasuhito Harayama. At age 55,  Harayama doesn’t look like an immediate candidate for the biological solution. The 64 year old Winterkorn should know that.

Attempts to ratchet-down the rhetoric in the Suzuki/Volkswagen row have failed. Suzuki launched a heavy missile in the direction of Wolfsburg. Suzuki will take the case to court, The Nikkei [sub] heard before a scheduled press conference in Tokyo. But fear not, Volkswagen gets a whole year to make up its mind.

At the press conference, Suzuki said it wants to buy back the 19.9 percent of its shares which are held by Volkswagen, and it wants to do so in November 2012. If Volkswagen disagrees, then Suzuki will go to arbitration. Volkswagen is unimpressed and said it will keep the shares.

“It remains the same: We are holding on to our shares,” a Volkswagen spokesman told  The Nikkei. According to Reuters, Volkswagen is “extremely disappointed that Suzuki Motor Corp. demanded mediation after rejecting VW’s offers to rescue a floundering alliance.”

“There is no legal foundation whatsoever obliging us to surrender our shares,” Volkswagen said  in a statement.

The court will be the court of arbitration of the International Chamber of Commerce, German media says. Apparently, this is what the contract between Suzuki and Volkswagen specifies.

With traditional compact pickups growing into the new “midsized” segment, Scion has long been tipped as a likely candidate to lead the US market back towards smaller, car-based pickup trucks. And, Scion’s VP Jack Hollis tells TTAC’s sister site Autoguide that such a vehicle, though not a certainty, could be possible.

Versus other vehicles, I can’t say it’s priority one. I’m very interested in it. A lot of prospective owners are interested in it and every meeting I have in Japan, I’m asking, what else can we do.

Hollis reveals that he has, in the past, pushed for an imported Daihatsu pickup for Scion’s US lineup, but that regulatory issues killed the business case. But now he’s suggesting that Scion and Daihatsu might jointly develop a small, fuel-efficient pickup… just as Subaru and Toyota/Scion developed the FT-86 together. If that happens, I’d expect something larger than Daihatsu’s typical kei-style trucks, for reasons hinted at in the video above. And to help you understand the legacy that a Daihatsu-Scion pickup might draw upon, here are a few random images of Daihatsu “trucks” (or possible inspirations) through the ages.

It’s becoming increasingly clear as time goes on that the Chrysler five year plan promulgated in November 2009 was merely a stopgap strategy aimed at stabilizing the then-recently-acquired firm while CEO Sergio Marchionne plotted a strategic course globally. Now, with news that Alfa is going to be re-launched with the US as its major focus (possibly replacing Dodge), we’re getting a better and better picture of where the Sergio Show is headed with his transatlantic alliance. In an interview with Automotive News Europe [sub], Marchionne gives the latest snapshot

In his vision, Alfa Romeo and Jeep both have the DNA and the rich history capable to make them the alliance’s two global brands. “We need to continue to globalize Jeep and Alfa, so the development of architectures and engines that are designed to support these two brands is crucial, and everything else becomes almost secondary,” he said.

Chrysler clearly won’t be a global brand, as its products are rebadged as Lancias in Italy. Fiat will offer full lineups in Europe and South America, but only the Fiat 500 will be a truly global brand, in a role Marchionne compares to BMW’s MINI. Dodge doesn’t even rate a mention in this interview, which can only be interpreted as more evidence that it will be lucky to survive at all.

Though the alliance’s two namesake brands, Fiat and Chrysler, won’t be used on a global basis, branding will be extremely important to the company’s future. In Marchionne’s words:

By 2014, we expect Fiat-Chrysler to reach 5.9 million units and we will have just three main architectures that drive more than 80 percent of that total volume. I have never lived through a period with this level of complexity and this level of optionality

It’s not surprising that Marchionne has chosen Alfa and Jeep to represent his cobbled-together empire globally; clearly they are the two strongest brands in what is now a somewhat bloated portfolio. But this latest development raises two fundamental questions: first, what happens to Chrysler/Lancia and Ram/Dodge, and second, can Alfa and Jeep really move 80% of their volume to three common platforms and maintain their brand integrity? Because if not, it won’t take long before Marchionne finds himself with three platforms and a whole mess of compromised, past-their-prime brands. It’s good to see that Fiat-Chrysler global strategy is beginning to take shape, but this one is clearly not without its risks.

Divorce is a complicated matter. Sometimes, it takes a while for all involved that it’s over. Apparently, they are in that phase. If the German magazine Wirtschaftswoche is correctly informed, then VW CEO Martin Winterkorn wants to bring the matter to a conclusion until the end of this year – one way or the other. Says Wirtschaftswoche:

“Either Suzuki reconfirms the cooperation, unambiguously – which nobody expects. Or Volkswagen cancels a cooperation which isn’t even two years old.”

Officially, Volkswagen sees a small chance that the cooperation continues. If Suzuki wants to remain wedded to Volkswagen, then “Volkswagen would be interested to continues,” said Hans Demant, the former Opel chief who now manages global alliances at Volkswagen. Wirtschaftswoche says that the cooperation was not without results: There are jointly developed prototypes in Wolfsburg. The sources of Wirtschaftswoche fingered Suzuki vice president Yasuhito Harayama as the culprit who torpedoed the alliance. There are “certain interpersonal issues,” Demant told Wirtschaftswoche.

The admonitions by Lower Saxony’s premier to wash dirty laundry in the privacy of your office appear to bear fruit – at least for the time being. Volkswagen has agreed to a cease-fire in the war of words with Suzuki.

“The discussion between both parties will be exclusively conducted internally. Volkswagen will not comment on any further speculations,” Volkswagen said in a statement regarding the domestic dispute with its reluctant bride Suzuki.  Volkswagen also stressed “that it will keep its 19.9 percent stake in Suzuki Motor Corp. despite persistent calls from its smaller Japanese peer to dissolve their tie-up, indicating that a continuing dispute between the two firms is unlikely to be resolved anytime soon,” says The Nikkei [sub].

There are no indications when and how these talks will take place. All ears on Hamamatsu now. If Suzuki will stop making announcements also, then that could be an indication that a real deal is in the works.  If not – not.