Father Time and Renault are running a tight race with me. In August 1987, I was quoted as saying, "Renault will never return to the United States in my lifetime." Based upon my present age, 85, and news reports, it now appears I am in a nip-and-tuck contest with Renault's possible return here.
Returning, however, does not ensure success for any of the potential automotive partners. A number of major hurdles need to be overcome. After Chrysler's acquisition of American Motors in August 1987, the primary task was to integrate the two companies into one as quickly as possible to achieve all possible synergies. Gerald Greenwald, Chrysler Motors president, gave me this assignment.
By March 1, 1988, only seven months into the merger, 13 of 19 functional areas were 100 percent integrated, and four of the remaining six areas were 95 percent or better.
The systems integration was the largest hurdle to complete and would take almost two years to finalize.
We were greatly helped by similar cultures, same language, same country, same locale and political systems, same overall UAW union factory workers with many AMC executives having Ford, Chrysler and General Motors work experience. Most importantly, Chrysler management was in charge — it wasn't a merger of equals or dual direction.
However, major outstanding issues were soon apparent. Chrysler had a host of brands, poor product representation and old, weak products in many market segments. And, it lacked the capital to support its new stable of brands. This was very similar to a crowded bird nest and a shortage of worms.
For example, Chrysler had no representation in the compact four-wheel-drive segment, which had grown from 147,000 vehicles in 1981 to 817,000 in 1986, when American Motors offered the highly successful Jeep Cherokee, code-named XJ. AMC also was developing an additional product in this SUV code-named ZJ — the Jeep Grand Cherokee. The Dodge brand had no entry in this rapidly exploding segment.
After a detailed review by Chrysler senior management, the Jeep ZJ was fully funded while a potential Dodge competitor was put on the back burner.
This type of capital allocation among brands will be experienced in any merged companies. To avoid this problem, forget about merging companies and remain separate and just select products and technologies — electric cars, artificial intelligence, driverless cars — to invest in together.
A merger of equals will be a failure. The Daimler-Chrysler experience was a failure. Renault-American Motors was a failure. Renault-Nissan is a failure. All of these failures were for many of the same reasons. Who runs the business and allocates the resources? The cultures and politics of the countries are quite different. For example, the French government was unwilling to keep funneling money down what they saw as a black hole at AMC in the U.S., while French factory workers were being laid off.
In summary, merged companies of this size — with different countries, cultures, language and different political systems — are never successful long term unless one partner is fully in charge. Even then, one side, such as Nissan, will be unhappy with its role with Renault making the key decisions. Nor will projected synergies be achieved unless targeted standalone projects and technologies separate from the companies' basic business approach are agreed upon before the merger. If synergies of billions of dollars were shared between Renault and Nissan, due to their alliance, why are Nissan's profits so poor? And Renault's as well.
A view of mergers from 50,000 feet always looks attractive. However, it's at ground level where a merger of equals always falls apart.
