DISSIPATING THE ILLUSION OF FINANCE ?

Different timeframes can be used to analyse the automobile industry. The long term changes which we observe tend to be structural in nature (this being the framework emphasised in GERPISA's historical approach). In the short term, it is the firms' current economic and financial performances that we observe. Carmakers who have not been able to stabilise their organisational configuration in such a way as to implement their profit strategies (as is the case for most) have been recording extremely volatile performances. Indeed, this volatility has been on the rise due to many firms' recent efforts to come up with new productive solutions.
 

For instance, a few months ago Renault could take pride in having become the leading European carmaker in terms of creativity and shareholder value. With its controlling stake in Nissan, the future seemed very bright indeed. Now, just a few months later, Renault is wearing a dunce's cap, accused of being in Europe the leading destroyer of shareholder value over the course of 30 2001. Its financial earnings will benefit to a large extent this year from the exceptional profitability of its Japanese partner - a partner who is due to take a capital stake in Renault in order to consolidate this crossed alliance (the arrangement is not a one-sided takeover as many overly precipitous observers would have it). Of course, there seems to be a great deal of upside potential to the projects that the two firms are running jointly. However, the fragility of the French carmaker, relative to the current euphoria of its domestic rival (PSA) and whether or not it is just as ephemeral a phenomenon, is a source of major concern, especially given the possibility that the European market might suffer from the general economic slowdown (as the emerging markets have done). Yet there is nothing surprising about the difficulties that Renault faces: a model renewal calendar that has been structured poorly; new product launches that have been delayed due to quality problems during the industrialisation phase, etc. These are all basic competitive risks in the automobile sector, albeit risks that have been seriously accentuated by the innovation and flexibility strategy which Renault has been pursuing.
 

The " fundamentals " we are reviewing here (a term that sports fans use when talking about rugby in much the same way that economists use it when discussing financial matters) apply to Ford also. Jacques Nasser, the American carmaker's former President, had advocated withdrawing from production activities in order to position Ford as a consumer service provider, and had made major investments in a future that is built upon the Internet-oriented perspectives of the " new economy ". In the end this lead to Nasser's demise, and the new CEO, William Clay Ford (a descendant of Henry Ford, the company founder) implemented a 180 degree turnaround, returning to the automobile industry's basics or " core business ": the design and production of vehicles, something that presupposes the development and consolidation of those competencies that are necessary towards this end. William Ford has also been focusing on the interests of the firm's other components (stakeholders such as distributors, suppliers and employees), and not just on the shareholders, as his predecessor had done. It was obvious that the former orientation was going to cause problems for Ford - after all, it only accounted for one of the several actors who need to be involved if a firm that has yet to find its true profit strategy wants to be able to rely upon an efficient company government compromise.
 

Given that the economic situation has just begun to falter, the difficulties that Renault and Ford (and other carmakers) are already starting to experience lead us to believe that if a full-blown recession does indeed break out, it will generate sudden revelations and strategic revisions that could accelerate the emergence, via a whole succession of ad hoc trials an errors, of a new productive order once there has been a dissipation of the last illusions to be associated with the mysteries of finance - a phenomenon that drew far too much attention to itself during the latter half of the 1990s.