| La Lettre du GERPISA | no 126 (novembre 1998) |
The way several automobile constructors have been evolving recently raises some perplexing questions. In Gerpisa's Newsletter 125, the Daimler-Chrysler merger was discussed. Here are two firms which, up to now, implemented completely different strategies, Daimler focusing on "specialization and quality"and Chrysler on "innovation and flexibility". One may wonder how this merger will now generate profit. Indeed, a profit-oriented strategy not only involves product policy and the firm's position on the market, but also all the means necessary to put this into practice, i.e. production organization, worker/salary relations, and the firm's governing compromise based on these means.
If the merger consists in lining up the profit strategy of the absorbed firm with that of the absorbing firm, then the first firm must change almost its entire organizational, social, and technical set-up. If the goal is to allow the two profit strategies to co-exist within the same group, then this signifies finding the means for a long lasting cohabitation, something which no one has succeeded thusfar, due to structural incompatibilities.
Of course, nothing is impossible. In the past, GM was able to render volume and diversity compatible, something which had previously appeared to be contradictory. Likewise, Toyota was able to generate profit from small quantity and batch productions of automobiles mounted on mobile assembly lines. Today, Daimler and Chrysler will have to demonstrate their capacity to innovate in the realm of management and organization in order to solve what remains to be a contradiction. Will this be possible in light of their differing pasts ? The fact that they are now obliged to find a solution, unless they decided to abandon the merger in a few years, might just be what is required to generate imaginative projects.
The same question can be asked of other firms. For example, what can Volkswagen expect from the Bentley take-over, or Lamborghini and Bugati? Of course, Ford bought out Jaguar, and Fiat has been controlling Ferrari and Maserati for some time now. But what genuine profit have they gained from this ? Up to now, not much from a financial standpoint ; in fact, the contrary, due to increased costs. From a publicity standpoint, the impact does not seem to be that important, and synergies are difficult to locate. Is this all worth it ? The increase in salary inequalities in a growing number of countries reinvigorates the market for expensive sports cars and luxury sedans. These particular market segments are becoming profitable again, under certain conditions. However, this is due to a very sharp accentuation of automobile specificity devoted to them. Hence, what type of technology transfer and savings can be achieved with absorbing firms who implement classical "volume and diversity" strategies ? Savings are probably easier to achieve with top-of-the-line recreational vehicles by specialized constructors such as the Rolls Royce by BMW, or Maybach by Mercedes.
Likewise, what exactly is PSA aiming at by attributing to Citroën an innovative new role, whereas Peugeot continues to apply a "volume and diversity" strategy ? How do they plan on rendering compatible (thus profitable) these two orientations ? Can the commercial risks required by the former be adopted on a long term basis, while the latter requires more important means which can not be used to compensate for losses eventually incurred by the former due to inevitable failures ? Can two highly different worker/salary relation models coexist within the same group, one based on flexibility and expertise required by an "innovation-flexibility" strategy, and the other based on versatility and the constant and hierarchical increase in salaries required by the "volume and diversity" strategy ? Can innovative vehicles be created from the platforms devoted to classical vehicles ? If so, what kind of innovative vehicles ? Questions continue to abound.
Likewise, how can one interpret Toyota's launching of Prius, the first mass-produced commercialized hybrid vehicle ? Is this a publicity stunt (indeed, the sale of Prius is subsidized, since it is selling at a loss), one directed at automobile conductors concerned about the environment, with the goal of changing Toyota's image since it does not intend to orient itself towards innovation ? Or is it the sign of a change in strategy ? Or yet again, does it reflect the belief that it is possible to do two things at once : have a classical range of products as well as conceptual innovative vehicles ? Only the future will tell.
It is likely that perplexing evolution in the aforementioned firms is linked to two inter-related processes: transformations in automobile demand, and changes in worker/salary relations within firms. The transition by numerous industrialized countries from institutionalized and moderately hierarchical national revenue redistribution to decentralized and competitive redistribution has modified demand structure. Alongside classical demand, one can observe the emergence of a demand for different sorts of vehicles by population categories who temporarily benefit from a sudden increase in buying power, in function of labor shortages experienced sporadically in certain professions and regions. These new expectations are accompanied by a demand for top-of-the-line models by that portion of the population who has become significantly wealthy in the past years, as well as a demand for lower quality vehicles by younger people and households who must limit their transport expenditures. Let us not forget demand in emerging countries which also presents differentiated characteristics. At the same time, the establishment of more competitive worker/salary relations throughout numerous countries along with union membership decline implies that it might be possible to obtain completely different work practices from workers, according to a firm's successive orientations.
The aforementioned firms will thus adapt themselves to new situations encountered, and will be capable of doing so from a social policy standpoint. Nevertheless, the question remains as to whether it is possible or not to simultaneously respond to all types of demand, and to mobilize the necessary financial means and labor force. In supposing that we are heading towards a type of balkanized and versatile market, then the "diversity and flexibility" strategy which had totally disappeared could eventually regain pertinence. However, this would require governing compromises on the part of the firm which would be entirely different from the ones existing at present.