By on December 14, 2009

Axis of Ethyl. Picture courtesy gamespy.com

First Renault and Nissan. Then VW buys a stake in Suzuki. Now Mitsubishi Motors  is in talks with PSA Peugeot-Citroen about a capital tie-up.

You’ve seen nothing yet, thinks Japan’s Nikkei. “The latest round of partnerships is widely seen as just the beginning of a major shakeup of the automaking industry,” says the paper that is usually well informed about these matters.

“Both Mitsubishi and Suzuki should take cues from Nissan Motor Co, which was rescued from the brink of bankruptcy in 1999 by French firm Renault SA.” says the Nikkei: Translation: Don’t just have small minority share and swap deals. Sell majority control to partners with deep pockets. And get ready for a serious battle for world market domination.

“The fact remains that on its own, Suzuki — which has allocated just 95 billion yen for its fiscal 2009 R&D budget — cannot compete with such giants as Toyota and Honda Motor Co. which have each earmarked 500-800 billion yen for the same purpose.”

“Even the tie-up with VW, which has sufficient financial resources and state-of-the-art environmental technology, will not be enough to enable Suzuki to catch up with the industry leaders in developing advanced eco-friendly vehicles.”

The EU-Nippon axis gives the big Japanese players reason to worry:

Toyota and Honda appear to be recovering from the deep slump into which the financial crisis plunged them, but neither can afford to be complacent about the recent series of alliances that could drastically change the landscape of the industry. If the VW-Suzuki partnership works as envisioned, there is no guarantee that Toyota will be a leading player in the small-car market in emerging economies, the importance of which is growing by the day.

“We must implement all possible reform measures. Otherwise, we might repeat the same mistake as General Motors,” Toyota President Akio Toyoda said, who is keenly aware of the challenges his company faces in the changing environment.

Said Honda President Takanobu Ito, “We would not be able to survive intensifying competition unless we reworked our profit structure so that we would be able to turn a profit even on sales of small cars.”

An axis between relatively rich European players and resourceful Japanese could exploit the “cheap and small” craze, carve up the world’s growth markets between  Japan and Europe, leave GM to whither on the vine, and give  Toyota a serious headache.

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13 Comments on “Get Ready For The Big One...”


  • avatar
    Cammy Corrigan

    I’ll believe these tie ups after a few years.
    1.  I wrote about how many analysts think this PSA-Mistubishi deal won’t go through, due to the amount of debt PSA already has. That will be a huge stumbling block for them,
    2. While VW and Suzuki are in honeymoon mode right now, I expect strained relations between the two. Osamu Suzuki is a proud man and won’t like being pushed around by VW. Let’s see how that plays out.

  • avatar
    texlovera

    I’ll say this for Toyota:  at least their leader recognizes that changes are in order.  I have more faith in their ability to implement those changes as part of an overall plan than in GM’s or Chrysler’s, even with the latters’ backs to the wall.

    As for Honda, I am (perhaps naively?) surprised that they are not already making a profit on small cars.  Or is he just referring to future profits?

  • avatar
    psarhjinian

    As for Honda, I am (perhaps naively?) surprised that they are not already making a profit on small cars. 

     
    I think the “profit on small cars” refers to emerging markets.  I’m sure Honda makes money on every Fit/Jazz they sell in North America or western Europe, but managing the same (or any) margin on the same car sold in China, Brazil, India and the like is harder.

  • avatar
    Bunter1

    IMO a shake up of the international players has been coming for a long time and is overdue.  The various gov’t band-aids have tried to prevent some of it but I think market forces/momentum will call the final shots.

    Too many players and too much capacity.

    Predict GM will sink and Ford will have to move fast.  HOnda could be vulnerable, great company but small.  TOyota will come out alright.

    Just thoughts.

    Bunter

  • avatar
    charly

    Honda Should buy Volvo

    • 0 avatar
      wsn

      Doesn’t make sense.
       
      If Honda is good, why buy a failing brand instead of improving their in house Acura?
      If Honda is bad, buying a failing brand can only increase the burdern of restructuring.

  • avatar
    wsn

    Seirously, VW<Toyota and Suzuki<Toyota. VW+Suzuki<Toyota.
     
    Honda is the strongest auto maker in the world. It’s making money in this recession. Followed closely by Toyota and Hyundai. VW and Ford may be able to survive, due to a combination of government help, “patriotic” buyers and failing of competitors. The rest are insignificant.
     
     

    • 0 avatar
      charly

      Honda is big in North America (& Japan). Outside that they are an also ran. and making money isn’t the same as having a future.

    • 0 avatar
      wsn

      charly, Honda is also doing very well in China and India.
       
      Making money isn’t the same as having a future. True. But making money in this environment is a good indication that they have a strong line-up and pipeline of products.
       
      Honda chooses to be focused and doesn’t offer as wide a range of products as Toyota/GM. But that should not be seen as a sign of weakness. Accord/Civic are as strong as Camry/Corolla. Fit/CRV/Odyssey are stronger than Yaris/Rav4/Sienna. Not to mention that GM doesn’t have a single non-truck vehicle that can match any of these Hondas.
       

  • avatar

    Uh-uh … VW+Suzuki>Toyota.

    • 0 avatar
      wsn

      In which way? Total units sold? Yes. But that’s not how I used “<” for. I meant strength in terms of finance, management, engineering and future development.
       
       

  • avatar
    Bunter1

    I’ve been waiting to see if the “rule of 3” (any given mature market has room for 3 major competitors) would start to assert itself on the world scale.  Had the gov not jumped in this adjustment would be well on it’s way in the USA (Toy, Ford, Honda w/ Hyundia as wild card-yes I’m dismissing Nissan).

    Toy and VW are in the power positions world wide and Ford, PSA, Fiat, Renault/Nissan set to sort it out.  I honestly think GM is to weak in the US and Yurp to win the cage match that is coming.
    China isn’t ready to go head to head but there will be another shake out if/when they gel.

    Like Honda a lot, but they will need to stick with what they do best, knocking out winners in nearly every category they play in, to stay strong.  Their secret is that they are the worlds largest niche player.  HOpe they continue to win at it.

    Bunter

  • avatar
    Dimwit

    This is a decade late in coming. Everyone has waited until their backs are to the wall before looking for dance partners. Some of these arrangements won’t last, partners of desperation. The Mitsu deal is the one I’d look to devolve. Within the next decade there will be a lot less companies though maybe not that many fewer brands. 

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