Would "Tribalism" sink the "Renault Alliance?"

Automotive News International Editor Charles Child has opined that "tribalism" would doom Kirk Kerkorian's dream link-up between GM, Renault and Nissan.

Child's main support comes from recent "failed marriages" in the auto sector:

"But would a GM alliance with Renault and Nissan help the GM elephant dance? Not a chance. In fact, a Renault-Nissan-GM alliance would be a monstrosity, a cumbersome exercise that would simply distract GM's leaders.Look no further than GM's recent history to see why.GM's alliance with Fuji Heavy Industries Ltd. (Subaru) foundered last year. . . Earlier, GM tried to make its alliance with Isuzu Motors Ltd. work. . . .GM's alliance with Fiat also flopped, costing Wagoner $2 billion to extract GM. Recent auto history is littered with other troublesome alliances and acquisitions: BMW and Rover, Daimler-Benz and Chrysler, and Ford and Jaguar, to name a few."

One problem with virtually every example cited by Child is that most of the alliances were little more than rescue efforts. Rover was the "English Patient," terminally suffering from years of neglect, nationalization, labor issues and underinvestment. Jaguar also has a lengthy, sad history of market decline, uncompetitiveness and poor performance. Fiat was virtually bankrupt and lacked competitiveness outside limited sectors (ultra-performance exotic cars, and domestically in Italy). Subaru is a minor niche player (AWD) and uses odd-ball boxer engines (unlike 99% of the rest of the market). Isuzu failed to deliver any useful technology or markets, other than medium-duty trucks and diesels.

Ford Motor Company's stewardship of Jaguar is informative. Although it has given Ford a respectable foothold in the luxury market, Jaguar's lack of direction, uncompetitiveness and inherent resources have led to a one-way relationship: Ford sustains Jaguar, but what does Jaguar do for Ford in terms of engineering, platform sharing, distribution channels or economies of scale?

Moreover, Child conveniently omits Ford's conquest of Volvo's car division and its controlling stake in Mazda. Excluding the Mustang (which is assembled in a half-Mazda plant), Ford would have virtually no new car models in the USA without Volvo and Mazda expertise. Although Speedzzter can vigorously debate the current direction of Ford, neither he nor Mr. Child can deny the synergy of the Volvo and Mazda ties to Ford's "Way Forward." That being said, William Clay Ford, Jr. is often criticized for failing to adequately manage "tribalism" WITHIN the traditional confines of Ford . . . .

Of course, DCX can hardly be classified as a failure at this juncture.

The Kerkorian proposal is signficantly different from each of the cases Mr. Child cites. The major market segments for the three companies are each different, but complimentary. Although limited intramurial competition does exist (e.g. Opel and Renault in Europe, Nissan & GM trucks and suvs in the USA, the China market), the major advantage of the "Renault Alliance" is that each company can reap engineering and procurement benefits without giving up much in their domestic markets.

The second problem with Child's analysis is that he discounts Carlos Ghosn's ability to play the enforcer and mediate between the various parochial fiefdoms. Sadly, William Clay Ford, Jr. can't take a management class from Carlos . . . .

Further consolidation among OEMs in the world vehicle market will occur. The question is whether it will be "gentle" win-win deals like Kerkorian is suggesting. Or whether it will be more hostile and cutthroat.