Friday, May 31, 2019

2096 A Tale of Two Losers

Here’s a biz maxim: You can’t make a winner by combining two losers.  Examples: HP and Compaq. American Airlines-TWA-USAir. The Pennsylvania and New York Central Railroads. AOL-Time Warner. Wendy’s-Arby’s. Alcatel-lucent. Sears-Kmart.

Seen enough?  Well, here comes Fiat-Renault or Renault-Fiat.  In one corner, wearing Green White and Red, Italy. The great wellspring of western culture, art and science. Vivaldi. Scarlatti. Da Vinci. The Vatican. Sophia Loren. The Roman Empire. Pizza.

In the other corner wearing Blue, White and Red. France. The great wellspring of western culture, art and science. Descartes. Voltaire. Sartre. Offenbach. Debussy. Bardot. Quiche.

What do these miraculous, incomparable titans of culture, music, and food have in common?

Bad tin.

Renault is partly owned by the French government.  That means the politicians will do battle over how much control they have to give up and to whom.  It’s always great news when politicians have a say in anything.  They’re such a bunch of cuddle-bunnies with your best interests at heart.

The Agnelli family of Italy is Fiat’s largest stockholder and they’re ready-set-go to escape from their sizeable chunk and can put its money elsewhere, which is what members are said to want.

At this point, the deal would consist of this:  Renault stockholders would get 50% ownership of Fiat, while Fiat stockholders would get half of Renault.

But it’s not really that simple.  Renault owns a big piece of Nissan which owns a big piece of another Japanese automaker, Mitsubishi.  

Head ready to explode yet?  Wait, there’s more.

Some of these chunk ownerships are actually “partnerships,” but the partnerships are hard to define and so is the influence the partners have on each other.

Sergio Marchionne was the last known Real Car Guy to run a major automaker. Marchionne was a brilliant deal maker, and an eight cylinder heart. But he had the audacity to up and die at the ripe old age of 66 in the middle of a plan to raise the quality of the fumbling Fiat and the Catastrophe-prone Chrysler.  

Few if any French cars are any better.  Renault, Peugeot, Citroen.  Get out and get under.

Fiat says the combination will “cure each other's faults.”  Yeah, that’s what they all say about these mega-mergers.  How’d that turn out for the Pennsylvania Railroad and the New York Central?  Or Chase-Chemical.

All these Ivy League MBAs are running around like they’re attending the Mad Hatter’s Tea Party.

Renault flopped in the US when people realized the cars got old after 40 thousand miles.  Fiat flopped in the US the same thing.  Fiat returned by buying Chrysler from the disassembly line at Cerberus Capital.  So, what do we have here?

Two top tier producers of bad tin will combine to lift themselves in rank to somewhere near the top of the list of companies disgorging vehicles.  A result:  gargantuan company with a manufacturing and management structure that would drive even Rube Goldberg nuts.

And bad tin.

--Speaking of bad tin, someone hand Bob Mueller an oil can because he seems to have frozen in place there in the woods of the District of Columbia. As Gail Collins noted in the New York Times the other day, his little speech about his report on trump needed an on-screen translation into standard English.  Go away, Bob… join a law firm where you can be a rainmaker and do no further harm. 

I’m Wes Richards. My opinions are my own but you’re welcome to them. ©
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But be aware I know tin doesn’t really rust.
© WJR 2019

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