Top 5 Automotive Mergers & Acquisitions
Mergers & acquisitions occur for reasons such as to synergise complementary strengths and weaknesses, to eliminate competition and ensure growth, to facilitate easier entries into new markets, and the global automotive industry we know today has been shaped by such M&A’s since the mid 80’s.
The industry have seen a massive increase in M&A’s (PwC) throughout the years, a development that certainly has been influenced by the technological advancements, and this is predicted to continuously increase due to the latest three major disruptive forces for automotive; connected cars, autonomous vehicles, and ride sharing.
Because of the importance of M&A’s and its major impact on the automotive industry, Automotive IQ reviews the top 5 mergers & acquisitions throughout the industry history.
OEM's Daimler-Benz and Chrysler
Price US$ 38 billion
Date completed 1998
Why it's cool and on our list The world’s largest cross-border deal turning into lawsuits and disappointments
In a so-called “marriage made in heaven” according to its then CEO Jürgen E. Schrempp, Daimler-Benz AG and Chrysler merged in 1998 in an exchange of shares as Daimler-Benz AG bought 92% of Chrysler, forming DaimlerChrysler AG. The merger was quarrelsome with lawsuits from investors over whether the transaction was a merger of equals as the senior management had claimed, or if it in fact was a Daimler-Benz takeover of Chrysler. A class action investor lawsuit was settled in August 2003, for US$ 300 million, whilst another lawsuit by billionaire investor Kirk Kerkorian was dismissed in April 2005. The transaction claimed the job of its architect, Jürgen E. Schrempp, who resigned at the end of 2005 in response to the fall of the company’s share price. The merger was subject to a book, named “Taken for a Ride: How Daimler-Benz Drove Off With Chrysler”.
Daimler-Benz agreed to sell the Chrysler division in May 2007, for US$ 6 billion. Chrysler reported losses of US$ 1.5 billion, and announced its plan to lay off 13,000 employees in mid-February 2007, close a major assembly plant and reduce production of other plants in order to restore profitability. Chrysler filed bankruptcy in 2009, which lead to the Fiat Chrysler merger.
OEM's Tata Motors Ltd. and Ford Motors (Jaguar and Land Rover brands)
Price US$ 2.3 billion
Date completed 2008
Why it's cool and on our list An Indian-owned company acquiring two of the most iconic brands amidst recession uncertainties
This was called “the most expensive mistake” within the automotive industry. But who could predict that Tata Motors would prove themselves to be the one company from an emerging market to successfully turn around a trouble and proud Western one? Hence, even though it doesn’t have the biggest price tag in our list, we do believe that the Tata Motors JLR merge played a significant role in the shaping of the automotive world.
Ford Motors, amidst struggles for their own survival, sold the iconic brand for a billion dollars less than what it had originally acquired it for. And even so, the biggest question that analysts would ask themselves then was whether Tata Motors could hold strong in the luxury car segment and lead the business to a growth. Contrary to popular belief, they did. Not only did Jaguar Land Rover thrive after the acquisition, but so did Tata that benefited from manufacturing sites in Europe and implementation of state of the art R&D centres into their core businesses. The biggest role to this success story was the decision of Tata to grant autonomy to managers in England and adopt a “hands-of policy”. Though 2015 has not been the most profitable year for Jaguar, they did however manage to hit a company high record of 137,653 car sales in their third quarter.
OEM's Fiat and Chrysler
Price US$ 10.4 billion
Date completed 2009
Why it's cool and on our list Bankruptcy, drama and big bucks
This merger dates back to 2009, after Chrysler had filed for chapter 11 bankruptcy reorganization on April 30th 2009. On June 10th, 2009, Chrysler broke out of the bankruptcy proceedings with the United Auto Workers pension fund, Fiat, and the U.S. and the Canadian government as principal owners. Throughout the next few years, Fiat would gradually acquire the other parties’ shares to take majority ownership of the company, and on January 21st 2014, Fiat completed the acquisition of the remaining 41.5% from the United Auto Workers, making the Chrysler Group a wholly owned subsidiary. On January 29th 2014, Fiat announced reorganization and intended merger into a new holding company, and on October 12th 2014, the company would be known as FCA following approval of the board and shareholders.
OEM's Volkswagen AG. and Porsche SE Holding
Date completed 2012
Why it's cool and on our list Epic takeover that included everything from secret planning to financial manipulations and a final governmental intervention that turned the tables for Porsche
From all the brands acquired by the Volkswagen Group – including Bentley Motors, Bugatti and Audi – our attention is turned to the Porsche acquisition drama. When the news broke in 2005 that Porsche’s chairman Wendelin Wiedeking acquired 20% of Volkswagen “to protect one of the world’s biggest carmakers from corporate-raiding locusts”, no one could foresee the end result.
A series of stock buys led Porsche owning an impressive 42.6% of VW by the end of 2008. That is when Wiedeking admitted that his plan – contrary to what was previously announced - was to take over 75% of Volkswagen shares by the end of the following year. Reaching the 75% would also mean that Porsche would have the option to receive an immediate €8 billion cash back on its purchase, and therefore emptying Volkswagen's cash reserves. Fortunately for Volkswagen, amid the first signs of a European recession, banks wouldn’t back Wiedeking anymore leaving him no possibilities for completing the acquisition. When Wiedeking turned to Emirate money for help, that’s when German chancellor Angela Merkel intervened by advising sheikhs to divert their funds to Volkswagen. Volkswagen’s response to the financially overstretched Porsche: A purchase of 49.9% of Porsche. More drama ensued – including the pay off of the almost 10€ billion debt inherited – but at the end Volkswagen “swallowed” a defeated Porsche by buying the remaining 50.1% of Porsche for €4.46bn in 2012.
OEM's Nissan and Mitsubishi Motors
Price $2.3 billion
Date completed 2016
Why it's cool and on our list Nissan to the rescue once again and Mr. Carlos Ghosn on his third mission of saving the auto world. We look forward seeing his third success story after Renault and Nissan!
Why would you add a troubled Mitsubishi Motors that only months ago admitted in falsified fuel-economy data and plunged sales into a 17 year old successful alliance of Renault-Nissan? Because of numbers: Adding Mitsubishi in the equation, the Alliance now produces 10 million vehicles per year, bringing it to the third place in the automotive world, only behind Toyota Motors and Volkswagen. And Mitsubishi is not only troubles: The strong presence of Mitsubishi in trucks and sport vehicles in the US, its cheap sourcing of raw materials as well as its gas-electric hybrid systems is what Nissan hopes to leverage. In the race for releasing autonomous technology in public streets as soon cheap as possible, the above can be crucial success points for Nissan. But we can only wait and see what 2017 will bring to this new synergy.