26 November 2018

United we are strong, divided we may crumble

This past week has seen news breaking with a speed unprecedented in my experience of automotive news reporting, with Carlos Ghosn and a senior colleague, arrested for alleged misconduct and subsequently sacked from Nissan although Renault are standing by him for the moment. Of course, as Ghosn was the creator and lynchpin of the Renault-Nissan-Mitsubishi alliance, this raises real doubts on the sustainability of the union.

Along with this, PSA Group and Toyota have announced that they intend to end their long-standing joint production of small cars at the Kolin plant in the Czech Republic by 2021, where the Toyota Aygo, Peugeot 108 and Citroen C1 cars have been built. While they have said that they substitute or add, whichever way you view it, cooperation in light commercial vehicles, with PSA Group assembling commercial vehicles for Toyota at its Sevelnord plant in northern France while the group's Spanish factory in Vigo would also produce new Toyota vehicles. Toyota is to buy out acquire PSA's stake in the Kolin plant and ‘integrate the factory in our European industrial base’ it has said.

While the arrest of Ghosn and Greg Kelly is disturbing, it will likely be resolved without prison sentences or perhaps even fines, the implications of Nissan’s manoeuvring to dismantle the Alliance and Toyota’s actions could be much more disruptive to the vehicle making landscape in Europe.

At a time when all OEMs are facing the need to make massive investments in electric and hybrid vehicles and connected and autonomous driving technology, the implications of carmakers ‘going it alone’ are more serious than at any time in the industry’s history.

Talking to a senior executive at Daimler last week, a most salient point came up in the conversation. He said that for any carmaker to invest in developing technology that was by its very nature being duplicated at other OEMs was madness. He likened it to the development of the modern production line and said that had that concept and its implementation not been shared by Henry Ford, every manufacturer, of almost all consumer goods, would have bankrupted themselves trying to, as he put it, reinvent the wheel again and again.

We also discussed the question of whether vehicle electric motor, battery and controller technology should be an OEM core competence. His blunt answer to this was: “No, there must be shared supplier-led development in these areas. For every carmaker to do it themselves would be a bit like them all drilling for oil or building their own power stations for electricity.”

If the events of the past week can teach the industry anything, it is that through joint investment and technical development OEMs can remain strong but divided they are vulnerable to the volatility of the market and the vagaries of human nature.


Simon Duval Smith

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