JD Power Automotive Forecasting has concluded that the potential risks of a GM-Nissan-Renault uber-alliance probably outweigh the benefits, considering currently available information.
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But the forecaster sees considerable economies of scale opportunities though it noted it could take two or three model cycles, or up to 12 years, to fully synchronise and integrate the three automakers’ platforms.
In a special report produced on the day GM president and CEO Rick Wagoner was expected to begin initial talks with his board on the proposal, the forecaster noted that both groups hold significant market share in the mature North American and Western European markets and are well represented in emerging markets and could account for up to 15m units a year and a 23% market share worldwide.
But it cautioned: “It is important to note, however, that the market share… for a combined group does not factor in the substantial overlap and likely erosion of share that would result from a consolidation.”
It added: The new group could achieve unprecedented economies of scale and buying leverage in addition to being the largest automaker. This group would initially be nearly twice the size of Toyota in terms of output.”
That’s not a universal view however. Just days ago, DaimlerChrysler chief executive Dieter Zetsche told the Reuters news agency that cost-saving benefits from alliance pacts were hard to come by.
“When you refer to the most recent speculation of that alliance, you’re talking about pretty high volumes but reduced incremental saving potential,” he said, noting that cost benefits were small when more than a million vehicles were involved in sharing components.
“There are very few suppliers that are able to offer you parts in that quantity, and the scale effect goes to zero,” Zetsche told Reuters while on a visit to Tokyo.
But JDP was more upbeat.
“We would not expect to see substantial negative implications in the short-term from a GM/Renault-Nissan merger in relation to model offerings. Such a deal would, in the beginning, be about sharing in R&D investments and global procurement rather than removing market model overlap and platform consolidation. The resulting group would eventually be able to take
advantage of enormous economies of scale by sharing vehicle underpinnings/vehicle platforms
including powertrain applications.
“The significant product overlap in the two largest markets in North America and Western Europe guarantees large initial volumes in high-selling segments.
“Both groups already have platforms aimed broadly at the successful B, C and D segments. This presents both a risk and an opportunity to both automakers and their suppliers, as the overlap would need to be addressed as part of the cost cutting within the first two years of the deal,” its report said.
The report added: “It is clear… that the timing of model activity and the related platforms is currently not well synchronised between the two groups; but the scope for very high volume component sharing is implicit in the proposed tie-up. To avoid a disruption in market activity, it would likely take two to three model cycles, or up to 12 years, to bring these platforms into alignment.
“The scope and timing of consolidation would be essential in any agreement and would determine how aggressively management could bring critical elements of design and manufacturing together.
“Consolidation would not likely stop with the models/platforms, as assembly facility consolidation, in addition to shifts across regions would be open for exploration.
“This could mean additional Nissan assembly and possibly even Renault vehicle assembly in North America.”
JDP also noted that GM, Nissan and Renault already have a little co-operation ‘form’ – they build vans together in GM and Renault plants in the UK and Spain.
It said that powertrain, platform, underpinning and component sharing, plus some technology exchange and some geographical advantages would likely be offset by market overlap and consequent share erosion, historical fact (the less than iconic DaimlerChrysler merger), culture clashes, competition laws and a long wait to realise benefits from platform sharing.
“As initial details are limited, our current view is that the significance of risks… may highly outweigh the benefits of such an alliance, at least from a mid – to long-term perspective.
However, our assessment is dependent on a proposed structure, which will likely be several stages away,” JD Power Forecasting concluded.
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