Get Ready For The Big One

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.