TO THE EDITOR:
GM's disposal of Opel ("Auf Wiedersehen, General Motors," Feb. 20) will perhaps serve to further erode one of our most cherished, but wrongheaded, dogmas: Since a) scale certainly matters when it comes to cutting cost, then b) more scale is always a good thing.
Of course, if an OEM is buying 500,000 identical parts instead of 50,000, it will get a better deal on them. But is the deal better at 5 million than at 500,000 -- especially if the supplier's individual production lines max out at 250,000 units annually, or if the 5 million units have to be built in 10 countries around the world? And if there is a part failure, would I rather have to recall 5 million cars or 50,000?
In my years of automotive consulting work, I have never seen any solid, quantified analysis linking OEM scale to profitability, but rather the reverse. If scale matters so much, how did GM go bankrupt?
How did VW fall into Dieselgate? How did Toyota stumble into its sudden unintended acceleration crisis? There are downsides to size as well as upsides.
Yet we continually see analysts predicting the "inevitable" consolidation of the world's OEMs, in order that they may reach ever greater heights of scale.
And yet we see that global OEM concentration is lower in 2017 than it was in 1990: The top 10 held over 80 percent of world market share then and hold about 75 percent now.
If I had to counter the "bigger is always better" argument in one word, it would be this: Subaru.
GLENN MERCER, Cleveland
