Now that the high-profile publicity-seeking stock-ballooning conversations promoted by Kirk Kerkorian have come to a predictably fruitless end, the real talks can begin. The serious negotiations can get under way, negotiations which, in fact, could lead to a result that’s the ultimate nightmare of the European motor companies: that the American auto makers would finally get their act together in Europe. Not only get it together but get it together — together. By Karl Ludvigsen.
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It’s time for Ford and General Motors to combine their European auto operations into a single company. Everything they’ve done so far in Europe could and would culminate in the creation of a vehicle-making juggernaut with the potential to seize and hold the high ground in one of the world’s most important markets. With the European Union expanding, thinking big about the future of its borders and economies, the opportunity is tailor-made for America’s automakers to think and act likewise.
Through the first eight months of 2006 the sales leader in Europe by far was Volkswagen with 2,089,462 units, 20% of the market. VW is the only big European motor company; the next largest, PSA, was far in its wake with only 1.4 million units and a 13.3% market share. Ford and GM ranked third and fourth, each with a share of just over 10 percent. Renault, Fiat and DaimlerChrysler trailed in their wake.
What would be the picture if GM and Ford joined forces? Taking the same two-thirds of calendar 2006 they’d have built 2,168,052 vehicles, making them the leaders in Europe ahead of Volkswagen with a 20.8% market share. For the first time we’d have two big automakers in Europe instead of the “Little Seven” plus Volkswagen with which we’ve been struggling along, taking all steps possible to avoid the industry’s inevitable consolidation. Why shouldn’t the Americans seize the lead?
European Motors — as we can call it for the time being — would start from a formidable base. It already has the top-selling cars in the important British and Spanish markets plus the best sellers in Ireland, the Netherlands and Sweden. Its Ford Focus and Opel/Vauxhall Astra are the first- and second-best sellers in Europe’s 27 countries, giving great coverage of the most important volume segments. With Jaguar, Saab, Land Rover, Volvo and Aston Martin it has superb coverage of the specialist segments as well.
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By GlobalDataExploiting its assets in Germany — inevitably the new company’s centre of gravity — European Motors would have outstanding research and development facilities. Most importantly, by virtue of its size and scope the company would be able to attract top talent. At all levels of its organisation European Motors would be a substantial independent company fully able to staff all its positions, from top to bottom, for life. No longer would its key jobs be used as temporary training posts for Americans, who only dimly begin to grasp the needs of Europe before they go back to the land of baseball and apple pie. Under a supervisory board representing its owners, the company would be managed like the dedicated European motor maker it would in fact be.
European Motors would be easily large enough to meet its principal platform-sharing needs from within its own organisation. Including its production for exports it would be making 2.5 million units yearly and aiming for 3.0 million. Thus its owners would no longer need to be struggling with the trans-Atlantic platform- and product-sharing projects that have wasted so much time, energy and money in the past. Ford and GM could leave European Motors to get on with its own imperatives while they concentrated on building the best possible cars and trucks for the American market — another piece of bad news for the Europeans and Orientals.
Such a consolidation would bring surprising benefits. In Sweden, Volvo and Saab could finally begin exploring the joint activities that the nation’s two domestics have long thought of doing while lacking a suitable industrial basis. That door would now be open. As well, European Motors would be big enough to create and share a larger platform between Ford and Opel. Neither has independently been able to maintain a position in the vital European executive class. With their shared volume they’d be able to step back up to the Scorpio/Omega category to the immense delight and profitability of their dealers.
I’m not underestimating the challenge of such a merger. There’d be huge impact at the factory and workforce level with substantial redundancies. But that’s just an indication of the economic benefits that would result from the creation of European Motors. Important and effective effort would be needed to maintain the strengths of the respective brands while their product commonality is achieved. Toward the latter objective I see the job as substantial but not Sisyphean, thanks to the already-existing broad commonality between the Ford and GM Europe product lines.
Making decisions about which plants would stay and which should go would require dispassionate analysis by the European Motors staff. It would also need to take into account the group’s hesitant eastward expansion when compared to its chief rival Volkswagen. New factories are needed in the East to supplement GM’s Polish operations. They may well wish to leapfrog their rivals and consider the Ukraine and Belarus. In the Far East European Motors would exploit its access to China and Korea to form alliances of both marketing and supply.
The major downside would be for the top officials of GM and Ford, who would no longer be leading imperial processions through their European empires with cadres of bag-carriers in tow. Instead they’d have to settle for attendance at periodic supervisory-board meetings. The compensation would be that they’d be getting the good news about the impressive results being achieved by European Motors, not to mention the steady flow of half its dividends into their coffers.
GM and Ford might well argue that this isn’t the time to think of such a merger. Both have been saying that their European operations are in good shape. Well, this is just the time, then, to unify them as a purely European motor maker that’s fully able to act independently with speed and decisiveness to meet the mobility needs of Europeans. To help them out I’ve taken the first step by registering www.europeanmotors.eu. I’ll be happy to provide it to the new company on request.
– Karl Ludvigsen
Karl Ludvigsen is an award-winning author, historian and consultant who has worked in senior positions for GM, Fiat and Ford. In the 1980s and 1990s he ran the London-based motor-industry management consultancy, Ludvigsen Associates. He is currently an independent consultant and the author of more than three dozen books about cars and the motor industry, including Creating the Customer-Driven Car Company
