consolidation in the auto industry: the Volkswagen - Porsche merger
The current global crisis in the automobile industry accelerates the industry-wide consolidation process. At a time when demand for new cars has been declining sharply for more than a year due to tight credit, great uncertainty about the economy and the expectation that gas prices will start rising again soon, a technological revolution is about to change the global auto industry fundamentally.
Out of all major car makers competing today, a considerable number is to go out of business as a new era begins. Dozens of brands are about to disappear in the matter of months all around the globe. It’s very likely that only a few car makers will survive the current crisis. We might see two major car makers remaining in the United States, about the same number in Europe while Asia (including Japan & China!) will probably have about three major car makers competing globally. Next to the survivors, we gonna see numerous small and innovative competitors primarily focusing on electric vehicles and completely new mobility concepts. However, most of them will be taken over by bigger competitors unless there are major companies like for example a battery manufacturer or another industry heavyweight backing them.
check out the following posts for more information on the transition of the auto industry:
the fundamental transition of the auto industry
Auto Industry in Transition II
Auto industry in transition III
In Germany, we’re about to see a merger of Volkswagen – Europe’s biggest car maker – and the well-known luxury sportscar maker Porsche.
Porsche has tried for quite some time to take control of Volkswagen and has gradually acquired a 51% stake in VW. However, there’s been resistance from VW employees and the German state of Lower Saxony which still holds a 20% - stake in Volkswagen.
To bring this long-standing battle to an end, the families controlling Porsche and Volkswagen have agreed to merge both companies. The new company’s 10 brands should co-exist independently if things work out well.
To some observers, however, it looks like the Volkswagen Group and Porsche could make the same mistake as GM: managing their multiple brands poorly, paying uncompetitive wages to please too powerful unions, producing low quality cars at high costs.
Critics say that 10 brands which are partly overlapping are unmanageable. Porsche, Lamborghini, Bentley, Audi and Bugatti do have some overlaps, as well as Skoda, Seat and VW.
Obviously, Porsche’s reputation could suffer from the merger with Volkswagen, however, Porsche didn’t really have a choice. The company is simply too small to develop new technologies on its own. Furthermore, the average emissions from Porsche’s fleet are way above the targets set by the EU. By merging with VW, Porsche can avoid paying high fines.
On the one hand, it’s to be seen whether Porsche’s loyal customer base approves of the merger and if VW’s luxury brands steal customers from each other. On the other hand, Volkswagen was quite successful in keeping up the independence of its various brands. Furthermore, Porsche and VW have been co-operating for years – sharing certain components and the development costs for new technologies.
for further reading:
Porsche and VW uniting 10 brands under one roof (from autoblog.com)
