Monday, December 14, 2009

Sin or synergy, that is the question

In a recent article in Automotive News, quote machine David Cole from the Center for Automotive Research explained that the Fiat-Chrysler merger is much more promising than the Daimler-Chrysler link-up was, because there is much more product overlap with the new alliance.

It struck me that this was the exact opposite rationale to the one that was touted about the DaimlerChrysler deal back in the day. From a 2001 article on the company:
At its start, the 1998 merger of Daimler-Benz AG and Chrysler Corp. appeared to unite exceedingly compatible partners. Chrysler would marry into a family of prestige, with Mercedes pledging its engineering and technological prowess. Street-smart Chrysler would show its partner how to fight for mass-market success in North America.

The article goes on to detail how this assumption was mistaken, but it really does beg the question of whether overlap is a good thing in a deal involving two car companies. You can argue it either way. You want to avoid overlap, since it doesn't make sense to put resources into two brands that compete with one another. Or, you want to make sure there's some overlap so that you can maximize the sharing of those resources, such as platforms and engines, between the brands.

Both sound kind of right, and saying either will make you sound smart. But at the end of the day, it's all just bullshit. There are too many other factors, like the economy, company talent both executive and otherwise, competitive forces, and pure luck, that influence the trajectory of a partnership like either of Chrysler's. To isolate a factor like overlap is exceedingly difficult, and probably misleading.

But I guess we industry analysts have to make our money somehow.

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