Just when it looks like Detroit's auto industry is driving a Motown groove, the wheels start to wobble.
Less than two months before the automakers are set to launch national contract talks with the United Auto Workers, top negotiators at General Motors Co. and FCA US LLC abruptly retired, "effective immediately." Forget the reasons, the moves signal a disarray that auto talks veterans are privately calling "unprecedented."
Not good, whatever the company spin about deep benches loaded with experience. Negotiation in the modern age of elastic pattern agreements and unrelenting competitive pressure depends on relationships forged over time. The churn doesn't help.
Second, the increasing likelihood of criminal indictments in connection with GM's botched ignition-switch debacle — officially tied to more than 100 deaths — gives new meaning to "liability" and how that is likely to influence corporate behavior, decision-making and posterior covering.
However hard the feds come down on GM, and they will, the margins for error are shrinking and the costs associated with regulatory compliance and internal monitoring are certain to increase.
Third, FCA CEO Sergio Marchionne's public campaign for a merger partner exudes suspicion and desperation in equal measure. Backed by Chairman John Elkann, he wants a deal with GM, successor to the partner he and Fiat SpA unceremoniously dumped nearly a decade ago and pocketed $2 billion.
His is a hard sell, whatever the merits. It's even harder in relatively good times, as the straight-talking (and undeterred) Marchionne clearly understands. But it's precisely in good times that he thinks his audacious proposal should be considered. By somebody. Anybody?
Ol' Sergio e-mailed GM CEO Mary Barra to suggest a tie-up. Not interested, she and the automaker's board said. He's reportedly seeking to enlist activist investors in his cause, presumably because the consummate dealmaker saw Barra and GM quickly accede to the demand for a stock buy-back by Harry Wilson and a couple of his hedge fund buddies.
Ask him, as I did at an SAE Foundation dinner last month, and he'll recount the reasons for his push: that the capital demands of the global auto industry outstrip the industry's ability to earn the cost of said capital; that too many players are spending big money to develop, say, nearly identical 2-liter, four-cylinder engines.
That the way out of the vicious cycle, especially for volume players like Fiat Chrysler Automobiles NV or GM or Ford Motor Co. or the French or whoever's products cannot command premium prices, is greater scale, rationalized product lines and sharper brand differentiation. (You know, like Ford's transformation under Alan Mulally.)
As sound as his business analysis may be — and it is in the case of his own FCA — he's litigating a question much of the current industry leadership, at GM especially, believes has already been litigated and settled. Trans-nationalism, except under most unique circumstances, lost.
Remember DaimlerChrysler AG, the trans-Atlantic disaster that failed to deliver just about every promise of its founding. Someone had to be in charge, and it would be the Germans from Stuttgart who demonstrated a consistent inability to play well with others.
Remember Ford's Premier Automotive Group, the repository of Lincoln, Volvo Cars, Jaguar Plc, Land Rover and Aston Martin. All of it proved a distraction from the core Blue Oval business and the desperate need to restructure it — a reality Executive Chairman Bill Ford Jr. came to recognize and Mulally arrived to execute.
Remember GM's "alliance strategy," an effort to glean expertise from diverse partners. From Fuji Heavy Industries and Isuzu Motors Ltd. to Saab Automobile AB, AM General's Hummer and a pre-Marchionne Fiat, none of them delivered the dividends envisioned by the alliance's architects.
Remember, too, GM's fairly recent history with another activist investor keen to muscle a trans-national tie-up. Armed with nearly 10 percent of old GM's shares, Las Vegas billionaire Kirk Kerkorian installed one of his advisers, Jerry York, on GM's board and set him loose. The goal: a tie-up with Carlos Ghosn's Renault-Nissan that would culminate in Ghosn running the whole show.
Didn't happen, partly because (as York told me before he died) GM's leadership at the time expected the due diligence on a potential tie-up to be skewed in favor of GM remaining independent and keeping its executives in the driver's seat.
You can bet none of this history is forgotten at the top of GM's RenCen headquarters. Or Ford's Glass House. Or anyplace these trans-national deals failed to deliver, in part because those leaders didn't have the unique skills of multinational players like Ghosn or Marchionne.
The added impetus: One of the partners in each of those cases — Nissan and Chrysler — had no other options. Without a partner, they would die, and the leaders knew it.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays and can be found at http://detroitnews.com/staff/27151.