UPDATE: NISSAN/RENAULT, FERRARI, HYUNDAI, FORD
by Bob Hagin
April 09, 1999
The automobile business isn't always the puffy, bright stories we get from the manufacturer's public relations people. Sometimes there's excitement, mystery, intrigue and sadness, just as with the rest of society. Our six-week business review is due, and these are the multi-faceted stories that attracted our attention:
RENAULT RESCUES NISSAN - It's no secret that Nissan is in deep financial trouble. In the past decade, it's been like a boat without a rudder trying to figure out who it is and where it's going. An example of this was its "Mr.K" ads. The little old man and his dog didn't promote the product, which is cars and trucks, not philosophy . And its Barbie, Ken and G.I. Joe animations were cute, but didn't lure buyers into its retail showrooms. Sales in this country have slumped as a result but this is small potatoes compared to the money worries that face the parent company in Japan. Poor decisions and sketchy management have put it in the hole for $22 billion, so following the international trend to consolidate with another auto maker, Nissan went courting to Daimler-Chrysler and Ford. It has also been making reciprocal eye contact with Renault of France. As a result of the two-year courting period, Renault has agreed to buy 35 percent of Nissan for a bit over $4 billion and come into the marriage with Renault flare, style and know-how - as long as the French pull most of the strings. Awash with money, Renault lusts after a return to the U.S. market. The Renault/Nissan conglomerate will then become the fourth largest auto/truck maker in the world.
FORD PICKS UP EX-BMW HOT-SHOT - When we last reported on the business side of the car business, we explained the whys and wheres by which BMW Chief Executive Bernd Pischetsrieder and his Number Two man, Wolfgang Reitzle, were both unceremoniously shown the door. Losing lots of money through the purchase of the British Rover was the reason given by the Quandt family and as 46 percent owners of BMW, it pulls the strings. Pischetsreider's whereabouts aren't exactly known, but a week after Reitzle signed up for unemployment, the Ford Motor Company, in the form of CEO Jacques Nasser, signed him up to head up its "Premiere Auto Group." The newly-formed group is made up of Jaguar, Lincoln, Aston-Martin and Volvo and it's the job of Reitzle to position each of them to take on other luxury brands in specific market niches. At $130,000 and up, Aston-Martin can take care of itself, but Jaguar and Volvo have their hands full with Lexus, BMW and the smaller Mercedes, while Lincoln plans to shake its grandfatherly image.
FAMILY FEUD AT HYUNDAI - Like the power struggles at BMW, families that own major shares of a company have a lot to say about who does what and with whom. Take the case of Hyundai. The Korean car company is a part of the Chung family conglomerate that has interests in real estate sales and construction on the peninsula besides building cars and trucks. But for the past few years, there's been control problems brewing between the brothers who founded the various Hyundai companies and it has spilled over onto their sons. About the time the coup at BMW was taking place, Chung Ju-Yung and his son Chung Mong-Koo ousted the father/son team of Chung Se-Yung and Chung Mong-Gyu for management of the troubled car company. Rather than being caused by mismanagement or the blame for a wrong selection of upcoming models, as was the case at BMW, the battle of the Chungs centered around who would take over when Chung Ju-Yung, the founder of the dynastic conglomerate, dies.
FERRARI FOR THE MASSES - I'm sure that a lot of you had concerns for this vaulted company when Enzo himself died 11 years ago. The company was on the brink of bankruptcy, despite the fact that Fiat was its major stockholder and that Fiat in turn was beholden to the Italian government. Ferraris were never very easy to drive and certainly not very comfortable, but it showed the world that you had truly arrived if you could park one in your driveway. Since that time, new management has been called in and the marquee has made an about-face. There are many new models that don't require the skills of Michael Schumacher, Ferrari's Number One Formula One Grand Prix driver, to pilot down to the supermarket for a loaf of bread. Things are good at Ferrari once again, hence the company showed a profit of $24 million last year - before taxes, of course. But quick cars aren't the only thing that Ferrari markets. If you can't afford the entry-level Model 355 at $160,000, the company offers "official" baseball hats, bathrobes, watches and even Mattel toy cars, all in that Ferrari blood-red color and all with the prancing-horse logo prominently displayed. And there's definitely magic in the name since 10 percent of Ferrari's profits come from the sale of these high-profile items.
Six weeks isn't very long. Check in with us in a couple of months and we'll bring you more tidbits from the "real" side of the auto business.