In the mid-1990s there were several well-respected car industry executives and analysts who suggested that by now, there would only be between eight to 12 global car companies left. Well, that didn’t happen did it?
In our 1998 report*, we quoted both Ferdinand Piech, Volkswagen’s chairman, and Bob Eaton, chairman of Chrysler, who foresaw a period of mergers and takeovers that would, in effect, almost halve the number of existing car companies.
We have lost a few along the way. But others have arrived (mostly from China) and some, thanks to clever alliances, mergers or takeovers (think Renault-Nissan and Hyundai-Kia) have blossomed.
The argument then as now – and remember this was more than 15 years ago – was that saturated markets in North America, Europe and Japan and gross overcapacity in these developed markets, especially in Europe, would force companies to merge.
What also happened, and is arguably of greater long-term significance, was a huge shake-up at the top level of the supplier industry, the so-called Tier 1s.
There was a serious concern in the industry that suppliers would get too big – tail wagging the dog – but that didn’t happen either.
What did happen was what was the dubbed the emergence of the Tier 0.5 supplier, a phrase coined by Magna International, the company that almost succeeded in buying Vauxhall/Opel from GM.
Suppliers took on the role of integrator and their importance gathered pace with the decision by GM to spin-off its parts division as Delphi; Ford’s parts supplier became Visteon. Before then, Johnson Controls bought Prince and Lucas merged with Varity.
The imperative that drove these deals apart from the need to have economies of scale, was globalisation.
Hard to think now, but then there were few truly global car companies or suppliers. As car makers moved to new territories driven by the twin demands of finding new markets and cheaper places to build, so the suppliers had to follow them.
Except for a few odd pockets around the world (Vietnam, Burma and north and sub-Sahara Africa) there are very few places left where the car industry isn’t present.
And that really has been a major change over the last 30 years.
*Transplants And Beyond, FT Automotive Business Publications
