Automakers Forge East-West Alliances in Order to Survive Uncertain Times

It has been said that politics makes strange bedfellows. The same can be said of the current state of the global auto industry. Although few have been completed, alliances between Western and Asian automakers are being seen as the solution for low consumer demand, overcapacity and more stringent environmental mandates.

The survival tactic began with the alliance between France’s Renault SA and Japanese automaker Nissan Motor Corporation and has made for some previously unthinkable partnerships.

Japan’s Suzuki Motor Corporation had no sooner exited a long-standing relationship with Ford Motor Company than a 19.9% stake in the company was acquired by Germany’s Volkswagen AG for $2.5 billion. That agreement was reached just days after PSA/Peugeot-Citroen SA and Mitsubishi Motors Corporation announced that they plan to expand their relationship beyond its current project-based status.

In addition to partnerships, 2009 has seen the sales and tentative sales of a number of Western-owned auto divisions to Eastern businesses. General Motors remains hopeful that Sichuan Tenzhong Heavy Industrial Machinery Company’s bid for its Hummer division will be granted regulatory approval by Beijing in early 2010.

Ford Motor Company appears to have cleared all the hurdles in its sale of Volvo to China-based Zhenjiang Geely Holding Group. Geely will reportedly need upwards of $1 billion in loans from Chinese banks to fund the $1.8 billion acquisition.

Beijing Automotive Industry Holding Corporation (BAIC) has purchased key intellectual property for General Motors’ Saab automotive division.

On December 3, France’s Peugeot and Japan’s Mitsubishi announced that they were exploring ways to strengthen their existing relationship for the expressed purpose of developing electric vehicles. Mitsubishi has seen its U.S. market share drop to 0.5% in 2009.

On December 9, Germany’s Volkswagen AG and Suzuki Motor Corporation confirmed a deal that will give Volkswagen a 19.9% share in the Japanese automaker. Suzuki will also reportedly,gain a share of Volkswagen. The deal will provide Suzuki with a much-needed infusion of operating capital and access to clean-car technology “ an area in which it has been lacking. The agreement will also provide Volkswagen access to a minicar platform and a footprint in emerging markets including India, where Suzuki has performed well in recent years.

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