CASE STUDY 9-6
The Globalization of the Automobile Industry
The automotive industry is rapidly globalizing, with six companies producing 60 percent of the total world sales of automobiles of about 60 million units. From the more than 40 independent producers during the 1980s, only about 10 or so remain today. General Motors has acquired Saab and Daewoo; Ford acquired Jaguar, Volvo, and Mazda; Renault merged with Nissan; Volkswagen acquired Seat, Skoda, and Audi; Daimler-Benz absorbed Chrysler. Only a handful of smaller independent automakers in the market today: BMW, Honda, PSA, and Fiat. These are not likely to survive without rapid growth (as BMW, Honda, and PSA are trying to do) or with a merger. The reason is that economies of scale are so pervasive that a company needs to produce more than 2 or 3 million cars to be able to survive. This is one reason that Renault merged with Nissan and Daimler absorbed Chrysler. There are, of course, some very small highly luxurious and expensive makes, but even these are owned by some of the larger companies (For example, Rolls Royce is owned by BMW and Ferrari is part of Fiat). All the other automakers are members of an alliance with one of the majors. Toyota is the undisputed best automobile company in the world: it makes the best quality cars, earns huge profits, and continues to grow very rapidly (and in a year or two is likely to replace GM as the world’s largest automaker).