A New World Order

By Tim Grey

Barely 18 months after the recession first hit the doom-mongers have been forced to eat humble pie.

GM has paid back its bailout loans early, Ford just announced its fourth quarterly profit in a row – of $2.1 billion – and even Saab is surviving to fight another day.

The landscape, however, has irrevocably changed with a new world order of automotive groups banding together to cap prohibitive costs and compete with the waking giants of Chinese and Indian car manufacturing.

It’s hardly a first for an industry which coined the term “badge engineering”, but its happening on a scale where risks of brand dilution are often being put aside for the sake of potential gains.

Take Daimler for instance, owner of one of the most valuable premium car brands in the world.

In April it signed a platform and drivetrain partnership with the Renault-Nissan alliance which will see Mercedes-Benz become a blood relation to these two famous pioneers of value motoring.

After signing on the dotted line Daimler’s chairman of the board, Dieter Zetsche, stressed that “individual brand identities will remain unaffected”.

Renault-Nissan-CEO-Carlos-Ghosn-and-Dr-Dieter-Zetsche-Daimler-AG-CEO-sign-contract

Volkswagen, however, seems to have no such qualms – at least not in Asia at any rate.

In December the world’s largest car manufacturer by volume bought a 20% stake in Suzuki.

The Japanese brand, which built its name building ultra-affordable “Kei Cars”, is also the owner of Maruti Suzuki, the Indian subsidiary which makes the Alto among other models.

According to New Delhi TV the first fruit of this union is likely to be the re-badging of Suzuki cars built by Maruti as VW and Skoda product for the Indian market.

“This will be a good move for Maruti, which will see volumes increasing while also maintaining margins on the models in question,”  Maruti Suzuki India managing director Shinzo Nakanishi confirmed to NDTV.

This rationalisation of car manufacturing doesn’t just mean badge engineering for the Asian market, though.

On April 21, the same day GM repaid its last $4.7 billion bailout loan, the Fiat Automobile Group (FGA) revealed in startling detail, to its shareholders and the European motoring press, its plans going forward – plans which epitomise the mantra of rationalisation.

By 2014, Fiat expects to double its revenue by ramping up production to 2.2million units from its current 1.6m, while overall FGA – which includes Ferrari, Maserati, Lancia and Alfa Romeo as well as every arm of Chrysler – will increase production to six million.

However, half of this product will be based on just three platforms – known as Mini, Small and Compact – with Lancia and Chrysler in particular being positioned as “sister” brands.

According to reports, each platform could be the basis for at least seven models, with each underpinning up to one million units each year.

That’s compared to only two models to a platform by today’s standards.

A similar process is further along the track at Ford, which despite off-loading Jaguar, Land Rover and more recently Volvo, is facing a potential badging issue – but of an entirely different nature.

Ford-Focus-MkIII

The FG-series Ford Falcon, by any measure, has been a huge success in Australia and New Zealand, but many pundits across the ditch are now asking whether it can survive the “One Ford Mission” put in place by the company’s CEO Alan Mulally.

The plan, like Fiat’s, is to make as many distinct models from as few platforms as possible.

By 2013, Ford plans the Focus platform, for example, to be one of just 13 Ford platforms around the world and one responsible for no less than five variants from hatch to SUV.

Mulally told Fairfax Media at the Detroit Motor Show in January that Ford also planned to have only one large car platform for all its global markets.

“The best thing for Ford is to bring our scale and volume (to the market),” he said.

“(Car-makers) who make one vehicle, a different vehicle for one country, I think those days are gone, because you can’t compete with the global companies, and Ford’s going to be a powerhouse globally.”

With its recent 10-year $1.8 billion investment in Australian manufacturing, Ford is not walking away from the local large car market.

It’s also not likely to dump a badge like Falcon which has deep heritage with its brand and a huge, cultish following in its home market.

However, if Ford chooses a European or American front-wheel-drive platform as the basis for its global large car, the next Falcon might just struggle to live up to its billing.

Author: magazinestoday

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