US President Barack Obama’s dramatic intervention into the fate of the US’ big three carmakers has sent a signal to the global auto sector to get its act together or drown.
The ouster of Rick Wagoner and Christian Streiff as chief executives of General Motors (GM) and Peugeot Citroen on Monday sent tremors through the boardrooms of the battered auto industry.
Lacking the systemic importance of the banking sector, which has been bailed out with trillions of dollars, the car industry is being left to bleed to death — or consolidate.
This month, Martin Winterkorn, chief executive of Volkswagen — the world’s third-largest car maker and sure-fire survivor of the financial crisis — told 200 analysts and reporters he could see the survival of one Japanese firm, perhaps a few Chinese, two or three Europeans and an American — Ford, clearly.
Even Toyota, the most likely Japanese survivor, which is run by a close-knit team of visionary engineers dedicated to eco-friendly technological innovation, is in trouble as the industry’s expectations for global sales of 70 million have turned into, at best, 50 million this year. US sales alone could halve to little more than 8.5 million.
In Europe sales could fall by between 20 percent and 30 percent and are now held up in a dozen countries by “scrappage” — payments for scrapping older cars. The 780 billion euro (US$1.04 trillion) European car industry suffers from at least 20 percent overcapacity and structural problems pre-dating the crisis.
The industry will see a shake-out in the coming year that could mean only a handful of firms remain in business. Volswagen, which is virtually in Porsche’s hands, will be one of them. French President Nicolas Sarkozy will do his damnedest to ensure that at least Renault — part-owner of Nissan and itself 30 percent state-owned — survives.
Daimler, owner of Mercedes, and BMW may be forced into a premium merger. Even in an Obama-backed shotgun marriage with Chrysler, Italy’s Fiat may bite the dust.
In Asia, China’s 150 auto firms will be forced by Beijing into a series of mergers and acquisitions. India’s Tata will — if it survives its expensive Jaguar Land Rover takeover — dominate the landscape, and in South Korea Kia is likely to emerge as the big player, with Hyundai — linked to GM — on a funeral pyre.
Wagoner was fired by Obama because he had failed to lay the ground for the “green” revolution and had driven what was the world’s biggest carmaker for 80 years into a brick wall as it ran out of cash. Insiders say that, with more genuine independent directors on his board, he would have gone years ago.
His departure underlines that Obama meant what he said during his presidential campaign when he warned the industry it should be on a sustainable path in an era of “peak oil” and the need for fuel-efficiency. The global industry, with a few exceptions, ignored his message. Top carmakers have been lobbying the EU for years to get Brussels to water down its environmental plans to cut car emissions levels.
But other car bosses could now be vulnerable as the industry looks for new leadership to reflect the changed agenda. Daimler CEO Dieter Zetsche and BMW head CEO Norbert Reithofer could be next in the firing line as premium carmakers suffer disproportionately from the global collapse of sales.