A Big Move
in Auto Industry

Possible alliance between GM and Renault-Nissan to hurt Hyundai, Kia at home, abroad


The move for creating an alliance with Renault and Nissan taking over 20 percent stake in General Motors is being formalized with the boards of the French and Japanese automakers approving the deal and GM confirmed its in the process of discussing how to go about negotiations on the matter. Toyota Motors has also been considering forming an alliance with GM, reports said, further clouding the future of the world auto industry. Other carmakers can't also stand still and will try to find ways to cope with the changes in the industry and not swept up by the massive waves of change. Hyundai Motor was said also to be considering its future moves including the formation of an alliance with foreign carmakers, possibly with DaimlerChrysler, its old alliance partner several years ago until the tie-up broke up.
The three carmakers located in the U.S., Europe and Japan will have combined car production capacity of 15 million vehicles per year, 25 percent of total car produced in the world, when the deal is concluded and is expected to be a great challenge to the Korean auto makers plans to expand their global car market shares, especially for Hyundai Motor and Kia Motors. The two car makers affiliated with the Hyundai Automotive Group have plans to build car plants in Europe and the United States and they will have another formidable competitor in addition to Toyota Motor in their quests to expand their shares of the global auto market. Both probable partners have automobile companies in Korea, GM Daewoo Motor and Renault-Samsung Motor. They also have potential to shake up the domestic are market in Korea through their alliance.
Opinions vary depending on individual experts. But they all agree that Hyundai Motor's will have a big problem in its effort to become the 5th largest auto maker in the world by 2010. The auto maker is still short of technology and quality compared to the three auto makers on the way to making an alliance and it will sustain a big loss if those companies put their cars on the market at discounted prices. Director Kang Chol-koo of the Korea Automobile Manufacturers Association said that the three auto makers can use their platforms jointly and exchange parts easily and hold joint R&D activities in the first stages of their alliance, which will impact the global operation of the Korean car makers in a negative manner. Hyundai Motor will be put into a disadvantageous position in the development of next-generation auto technologies. He said GM, Nissan and Renault can lead the development of advanced cars including hybrid cars and also the standardization of next-generation auto technologies.
Another challenge to Hyundai Motor will come from China as Chinese auto makers are gearing up to move into the global auto industry. SAIC Group based in Shanghai recently unveiled plans to build its own locally branded vehicles. Its been recruiting top-notch foreign auto firm executives like Phillip Murtaugh, a former GM executive, to take charge of its overseas operations from its Shanghai office. Hiring a car industry pro like Murtaugh is a real coup and a clear indication that SAIC no longer wants to play just a back-up manufacturing role in China to foreign auto makers, according to foreign reports. He will now serve as executive vice-president for international operations at SAIC Motor. "My role is help them become a globally competitive company,"the former GM executive said. The situation poses a formidable challenge to Korean auto makers'path to expand their global car market shares. The Chinese automotive group already has taken over Ssangyong Motor in Korea with a small market share in the Korean car market.
Nissan officials expressed their positive attitude on the projected deal to make an alliance with GM. Renault also said it will begin preliminary rounds of negotiations if GM comes forward with the proposal. As things stand now, the proposed deal looks likely to gain speed with the three concerned parties showing positive signs due to the projection the deal offers a great opportunity that they will be able to occupy a leading position in the intensively competitive global auto market.
GM has been trying to restructure its operation and to recoup losses by closing down 10 plants and dismiss 30,000 employees, but the largest U.S. auto maker sustained a 26 percent reduction in its monthly sales in June compared to the same period a year earlier.
Many auto experts also noted that the three auto makers would have to solve many problems to make their alliance a success. Wall Street Journal said in its report that the alliance between Daimler and Chrysler has not been a success and GM should take note of that experience before going ahead with the alliance with Renault and Nissan. nw


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