In Australia, the top 10 car companies all spend upwards of $10 million annually trying to convince consumers that their brand is superior / more desirable than the competition. Yet on paper, many cars in competing categories are very similar. Beneath the skin, some notional competitors are almost identical.
Elsewhere in the corporate structure, car companies are trying to make their cars more similar – not less so. There’s an ongoing marketing challenge. Obvious reason, economics: one of the niftiest ways of improving the bottom line is to use parts from another, existing, car (or cars) in the next one (or ones). It saves them having to design, prototype, test, certify and produce new parts, obviously.
Take this one step further: why not produce the one engine designed to do the job (even with a few minor tweaks) across a range of cars? Makes sense. You can do it with technology, too. Everything you’ve already learned about crash safety or direct injection, or hi-tech manufacturing processes can be incorporated more easily in your next design than if you had to develop it all from scratch.
Then there are economies of scale – the more you produce, the cheaper each individual unit gets. Simple.
Final step: buy another car company and use, say, the engines from one across both, the crash technology from the other, run just one proving ground…
This is fundamentally why car companies own other car companies. Take Ford’s ownership of Volvo, which kicked off back in 1999. Did you ever wonder how it suddenly (this is a relative term) became a walk in the park for the Falcon to achieve a five-star safety rating?
It’s incest, automotive-style. And everyone’s doing it.
Until recently, Ford also owned 33.4 per cent of Mazda. (Today it owns only 13 per cent, thanks very much to the GFC.) The companies co-developed technology and then shared it. Park a Mazda3 next to a Volvo C30 and check them out closely. The reason they’re so similar isn’t a coincidence – they’re built on similar underpinnings and they share some fundamental engineering. This co-development arrangement appears to be on the rocks, however, in the aftermath of Ford’s lesser ownership position.
Volkswagen: The conglomerate has stated it will be the world’s largest automaker by 2018. (You have to admire that German confidence.) The company owns the following brands: Volkswagen (obviously) plus Audi, Skoda, Bentley, Lamborghini and … soon … Porsche. (The latter after an epic David V Goliath battle that would have gone the other way had Porsche been able to stump up the cash to exercise the options that would have given it control over Volkswagen.)
There’s a reason the Audi R8 has a 5.2-litre V10 with 386kW and 530Nm. It’s called the Lamborghini Gallardo… And behind the scenes, you’ve got Skoda manufacturing transmissions for Volkswagen, etc.
Volkswagen also just bought a 20 per cent stake in Suzuki for $US2.5 billion … as you do..
Mention ‘Fiat’ to your average punter in the street, and they think of the 500 – often the old one. The reality is quite different – Fiat is a massive, sprawling entity with an enviable garage and a history of dicing with bankruptcy. It owns Ferrari, Maserati, Alfa Romeo and truck manufacturer Iveco. Thanks to the recent bail out of Chryser, Fiat also owns Chrysler, Dodge, Jeep and Ram – and the cross-pollination there is only just about to kick off (though rumours of the next-gen Viper sporting a Ferrari V12 in the manner of R8/Gallardo have been quashed).
General Motors, the world’s former number one vehicle manufacturer, amassed a stable of brands so heavy and ultimately unstable that they literally drowned the company, which declared itself bankrupt in 2009. Holden, obviously, is a GM brand. It’s joined by Cadillac, Chevrolet, Buick and GMC. Saab is still hanging around GM’s post-bankruptcy neck like that pesky albatross (Spyker might buy it; bad luck for the Dutch if that sale goes ahead). But retired, RIP, are Saturn and Pontiac – the latter very bad news for Holden, which did a tidy export line in left-hand-drive Commodores dressed up as Pontiac G8s. And Hummer? It’s Chinese now – owned by a four-year-old manufacturer of cement mixer trucks and tow trucks with just 4300 employees, called the Sichuan Tengzhong Heavy Industrial Machinery Co. Hummer should fit into the company’s product range nicely.
Daimler owns Mercedes-Benz, Maybach, smart, and the Freightliner and Sterling truck businesses. Renault and Nissan are joined at the hip.
Indian industro-conglomerate, Tata, progenitor of the world’s cheapest car, the two-cylinder Nano, also owns Land Rover and Jaguar – a fact often overlooked in Jaguar’s and Land Rover’s marketing communications. Fact is, Tata picked Jag and Land Rover up for a song ($1.7 billion Aussie dollars) when it bought both brands from Ford in 2008. Ford paid $US2.5 billion for Jaguar in 1989 and $US2.75 billion for Land Rover (which it bought from BMW) in 2000. Despite the apparent discount, ongoing Brit-brand operational issues have placed Tata under immense financial pressure.
Hyundai owns Kia, which explains, for example, why the powertrains of the Santa Fe R 2.2 and the Sorento are so apparently … identical.
Toyota owns Lexus (which explains why the Camry is so quiet and refined – couldn’t have a rough-around-edges platform under the Lexus GS). It also owns Daihatsu and truck maker Hino … as well as a 16.5 per cent stake in a company called Fuji Heavy Industries, which owns another brand you may have heard of – Subaru.
China, is just coming to the auto-incest party. In addition to the Hummer scenario above, Geely Automotive acquired Albury-based DSI (Drivetrain Systems International) when Aussie company, which is one of the world’s few remaining bespoke and independent auto trans manufacturers, foundered financially earlier this year. Geely also looks like being the frontrunner to purchase Volvo from Ford.
Volvo is the last remaining brand in Ford’s Premier Automotive Group quartet. (Jag and Land Rover went to Tata as noted, and Aston Martin went to a consortium of two major investment houses based in Kuwait. The consortiums are led by David Richards of Prodrive fame and Dr Bez is the CEO of the company.)
The reason Geely wants Volvo? Simple – Geely has six factories in China with a combined production capacity of about 300,000 units annually. What it really needs is the technology to underpin a rapid improvement in its product. It’s a lot cheaper – not to mention faster – to buy a company with all that technology in-house than it is to develop it in some new laboratory just outside Shanghai.
Volvo is both knee-deep in revolutionary technology, and an absolute bargain right now. In fact, Ford paid $US6.5 billion for Volvo back in 1999 (when the Premier Automotive Group still seemed like a good idea). Geely looks like buying it for ‘just’ a smidge over $US2 billion.
Incestuous global business, isn’t it?