Published on May 30th, 2019 | by Steve Hanley0
Rumor Mill Goes Into Overdrive — GM/Ford Merger On The Horizon? And What About Tesla?
May 30th, 2019 by Steve Hanley
Market Watch is running a story — based on absolutely nothing as far as we can tell — that suggests Ford and General Motors might possibly, in some remote galaxy far, far away, merge into a new business entity. Mind you, neither company has said or done anything publicly to suggest such a merger is being considered.
The real story is that people are talking about this stuff because, as the EV revolution progresses, it is intuitively obvious to the most casual observer that some traditional companies are going to have a Nokia moment and disappear, consigned forever to the dustbin of history.
Which ones will fade away? No one knows for sure. Fiat Chrysler seems like a likely candidate unless it pulls off its proposed merger with Renault. BMW seems to be behind the curve. Honda and Toyota still have no fully battery electric cars among their offerings.
Nissan is doing okay, but is chaffing at the restrictions imposed upon it by its alliance with Renault. Because the joint business is chartered in France and Renault has a much larger share of Nissan than Nissan has of Renault, Nissan is precluded from voting on Renault corporate matters. In an effort to smooth Nissan’s ruffled feathers, the Fiat Chrysler–Renault merger would be chartered in the Netherlands, allowing Nissan a larger voice in the resulting business — assuming there is one.
There are suggestions floating around that the arrest and imprisonment of Carlos Ghosn might have been instigated by Nissan management as a way to restructure its deal. If true, expect Ghosn to exact retribution at his earliest opportunity. Talk about your palace intrigue!
Market Watch says Ford has one ace in its hand — the F-150 pickup truck. Other than that, it’s got nothin’. GM has a strong presence in China, but Ford’s sales in that country are modest and trending down sharply.
Jim Hackett, Ford’s CEO, boasts about 40 electric and plug-in hybrid models coming by 2022, but as Market Watch points out, “Ford may build more electric cars and hybrids, but selling them is another matter. The competition in this market runs from tech companies like Alphabet’s Waymo to Tesla, startups, and every major manufacturer in the world. There is no evidence Ford is ahead of this wave, and so far, it appears the company is behind it. Confidence in Hackett, in particular, is low.”
Market Watch goes further with its predictions. “While GM may have a future as a standalone car company over the next decade, Ford does not. Its market cap is down 42% over the past five years, while GM’s is close to flat. The savings in a combination would be well into the billions of dollars. A marriage of the two also could compete effectively with Toyota, VW and perhaps the new Fiat Chrysler and Renault combo.”
The Market Watch story is just that, a story. But it demonstrates how shaky the ground is under the car business these days. Even Tesla has been drawn into the rumor mill activity. Because Apple considered buying Tesla three years ago, some think it could still be interested in its Silicon Valley neighbor today.
Others think if the deal with Renault doesn’t work out, FCA could cast covetous eyes toward Tesla. Yeah, as if Tesla would have any interest in being absorbed by a company whose late CEO begged people not to buy electric cars, a company which apparently has to buy billions of dollars ZEV credits from Tesla in Europe because it is so far behind on electrification. Sure, Elon would be on board with that! Scratch that rumor.
Here’s a fun exercise. List the top 10 car companies in the world. In 5 years, half of them will probably be out of business. That’s the power of the EV revolution.