By investing in Fiat S.p.A. last week, General Motors added another high-profile automaker to its growing list of global partners.
We are convinced worldwide strength is now essential for automakers. GM joined hands with an important global competitor, providing opportunities to cut costs. Moreover, the deal keeps Fiat out of the hands of another automaker, making it a significant defensive move for GM.
But one aspect of this deal is worrisome. GM spent the 1990s streamlining a decentralized, slow-moving organization. It has made clear progress, particularly in North America, but it is too early to declare victory. At this critical time, just as GM gets its own house in order, it is inviting over a diverse group of guests.
To understand the pitfalls, take GM's recent experience developing its global L850 four-cylinder engine, first installed in the Saturn L series. Getting engineers from Adam Opel AG and GM in North America to work out their differences was a long, bruising battle. They needed neutral helpers from Lotus Engineering in Great Britain to find common ground on various issues.
So now GM will work with Fiat to build engines. In the beginning, the management task - shifting assets, staffing new joint ventures - will be easy. But down the road the two sides will have to reconcile the small-engine needs of two different companies and cultures. That is tricky business. GM CEO Rick Wagoner said managing the Fiat relationship will not strain GM management, but we have our doubts.
GM recently cut a partnership deal with Subaru's parent, Fuji Heavy Industries Ltd., and is negotiating for control of Daewoo Motor Co. Ltd. GM envisions coordinating global strategy with Fuji, Daewoo and Fiat, along with current partners Suzuki and Isuzu and nonequity partners Toyota Motor Corp. and Honda Motor Co. Ltd. That is daunting.
Global events sometimes move too fast for corporate strategists to be neat and tidy about every decision. But as GM works quickly to get bigger, it should remember that speed counts, too. In fact, getting to market first with ground-breaking products is what counts. Cutting costs can take you only so far.