Strange Bedfellows: GM-Ford Alliance Talks Reflect Shift in Auto Industry

Includes: F, GM
by: Judith Levy

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GM, Ford Alliance Talks Mark Auto-Industry Shift

  • Summary: The two biggest U.S. auto makers, General Motors (NYSE:GM) and Ford (NYSE:F), recently initiated and then abandoned talks of an alliance -- a notion that reflects dramatic changes in the auto industry. GM shareholder Kirk Kerkorian is pressing the company to open similar alliance talks with Renault and Nissan. Ford CFO Don Leclair, while refusing to address the aborted discussions with GM, cited Ford's arrangement with competitor PSA Peugeot Citroën SA for six- and eight-cylinder diesels as, "the kind of cooperative venture that you need to be looking at." Ford, GM and DaimlerChrysler's (DCX) Chrysler Group are competitors of old, but the growing threat from foreign rivals like Toyota (NYSE:TM), "has left all three facing shrinking market share, declining profit margins and rising pressure to rethink their strategies." Although a full merger between Ford and GM would raise antitrust concerns, the companies have already cooperated on a six-speed transmission and are open to further engine and transmission cooperation. GM would also like to involve more participants in its gas-electric hybrid technology venture with DaimlerChrysler and BMW.
  • Comment on related stocks/ETFs: John Bethel cites sector analyst Jerry Flint's reflection that Detroit's luck has run out; he doubts a GM/Renault/Nissan confederation will ever become a reality. Rob Zenilman identifies Toyota as a major threat to GM and Ford, citing Bill Allen's observation that Toyota's development slowdown and quality improvement are signs of strength.

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Tagged: , Auto Manufacturers - Major
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