If Kirk Kerkorian gets his way and installs Renault-Nissan as General Motors’ partner, he’ll want to see a return. Clearly Kerkorian, GM’s single largest shareholder, is unhappy with the speed of the company’s turnaround, and he believes Renault-Nissan boss Carlos Ghosn – “Le Cost Killer” – will sort things out at a brisker pace.
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But where are the economies of scale? Apart from some vague pronouncements about greater common purchasing, it looks on the surface as if Ghosn’s main job will be to take the axe to GM’s flabby North American activities – too many models; too many plants; too many workers; too many brands.
Secondly, Ghosn needs to find a European solution to Renault’s own problem – the lack of a premium brand, which means it’s unable to make the sort of returns that the likes of BMW can achieve. And Ghosn has already set an internal target of 6% margin by 2009 as part of his own plans for Renault.
One way to achieve this would be by shunting Opel out of the volume sector and turning it into an Audi-style near-luxury brand. Back in the 1950s, when Audis had two-stroke engines and BMW made bubble cars, this was precisely where Opel sat in the market, with big sedans like the Kapitan, Commodore and Rekord.
Indeed, the Opel brand is retreating worldwide. GM has also pulled it out of Japan following a slump in sales, and Chevrolet is being used as the springboard brand in Russia, not Opel. Opel cars are being used as the basis for new US Saturn models, and the availability of the US-only Saturn brand provides a neat alternative to launching Opel Stateside, while also giving Saturn a more up-market range to challenge the likes of BMW and Lexus, brands favoured by Saturn’s target buyers.
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By GlobalDataSo a future as an Audi rival might not be that distant for Opel. “German” sells in the sector – so Opel probably represents a better long-term bet than struggling Saab or Cadillac. The price for GM would be the axing of Vauxhall in the UK – a move that would be unpopular locally and would almost certainly spell the end for the Ellesmere Port plant in north-west England – but certainly not fatal to GM’s strong position in the British market.
The reason such a plan would now be feasible is that between the three putative partners there exists a very strong Emerging Markets strategy. GM finally has a global volume brand – Chevrolet – which is going great guns in Europe and could slot in to the market very neatly just below Renault and Nissan, but able to hold its own against the likes of Fiat, Citroen and Skoda.
The acquisition of Daewoo brought a crucial skills set to GM – the ability to develop cars that work in emerging markets. Cheap to build and sell in emerging markets, but with quality levels high enough to be competitive in the west.
Not all automakers have this skills set. Toyota, Honda and Hyundai do – but VW, Ford and DaimlerChrysler all lack the ability to compete seriously at this level. PSA still relies largely on not-quite-hand-me-down technology, through cars like the 206.
But Renault, through its innovative Logan sedan and the purchase of Romania’s Dacia, has acquired the skills to build Emerging Markets cars. And uniting Renault and GM-Daewoo would create a potentially very strong position in fast-growing parts of the world car market – which in turn would allow Ghosn to take tough but necessary actions in Europe and North America.
Clearly Chevrolet’s ex-Daewoos are a more sensible proposition in places like India and China – a fact that GM has already recognised, axing the Opel brand in India and replacing the Corsa with the Chevrolet Aveo in China.
This also means the new Corsa, which will be unveiled at the London Motor Show this month, will not form the basis for various emerging markets cars. Previous Corsas spawned sedan, wagon and pick-up derivatives and claimed large market shares, wearing Chevy badges, in south and central America. In future, this role will be filled by derivatives of Korean-developed models such as the Aveo, which is set to become something of a “world car”.
With Renault on board, the Logan could compete for this business too. Co-operation between Renault-Dacia and GM-Daewoo could become a feature of the alliance, bringing down costs. In future, the Logan and Aveo could share a platform – potentially bringing together well over 2 million units of production. Likewise, the Chevrolet Matiz/Spark could provide the basis for sub-B sector Renaults or Dacias.
Capacity would not be an issue – if Daewoo were to become stretched in Korea, Renault has its own under-utilised Korean plant, Renault-Samsung in Pusan. In Central Europe, GM’s plant in Gliwice, Poland, could work more closely with Dacia in Romania and Renault’s Turkish plant.
And a combination of Nissan’s ambitious China production facilities, a partnership with Dongfeng Motor, and GM’s strong alliance with Shanghai Automotive, could give the alliance a dominant position in potentially the biggest market of all.
Globally, the brands are a good fit. In most other emerging markets, there is some combination of Renault, GM or Nissan. South America, for example, has a strong GM presence and a reasonable Renault one. Nissan is in Mexico in a big way. Both GM and Nissan make pick-ups in Thailand – it would be very easy to ally these activities along the lines of the existing Renault-GM light commercials venture in Europe.
Combined GM-Renault-Nissan market share would most likely be number one or two just about everywhere – which is how big businesses like to be. And working out who does what would eliminate some risky decisions regarding Renault itself from Ghosn’s agenda – like launching the Renault brand in China or India, where it’s basically missed the boat; or returning to the US; or somehow trying to make large, luxury Renaults.
Sceptics say Ghosn has bitten off more than he can chew. But for all GM’s woes in North America and Western Europe, there is much to build on for the long-term – in China, Poland, Korea and Brazil.
How 89-year-old Kirk Kerkorian feels about the long-term is a different matter. He’s probably sown the seeds of GM’s salvation, but he probably won’t see the flowers bloom.
Mark Bursa
