Mergers & Aquisitions of Automobiles Industry

Tata Motors acquire Jaguar & Land Rover two iconic brands in 2008.GMC collaborating with Toyota his major competitor, to work on Hybrid Engines and Fuel Cells technology. GMC is counting on even more efficiencies to be gained through its 20 percent purchase of Fiat to compete in Europe and in rest of the world to save millions and billions of dollars.Cerberus acquired an 80.1 percent stake in Chrysler in August 2007 for $7.4 billion from the German automaker Daimler AG. Now GMC is in talks to merge Chrysler with them, the deal is going to take place in few weeks & the chances of merger are 50-50 October, 2008. Porsche made a bid for Volkswagen that values the carmaker at 35.8 billion euros ($47.7 billion), a low offer aimed at leaving Porsche with a controlling stake rather than full ownership. Toyota may add 30 billion yen at Tohoku plant in Japan at the end of year 2008. Hyundai set to launch his new plant in Czech Republic by the end of November 2008.

FAW FIRST AUTOMOBILE WORKS

FAW Is China's first automobile manufacturer. FAW is one of the "Big Five" Chinese automobile manufacturers along with Dongfeng Motor Corporation, Shanghai Automotive Industry Corporation, Chang'an Motors, and Chery Automobile. The company was established in 1953 with ranges such as Jiaxing mini MPVs, Xiali saloon cars and Hongqi luxury cars.

FAW Group started out in 1953 as First Automobile Works with assistance from ZIL and finished in 1956. During its first 30 years, its major product was Jiefang CA-10 medium truck, the first mass-produced automobile in China based on ZIS-150. A couple of years after the CA-10, they introduced the CA-30 6x6 army truck based on ZIL-157. The next generation of Jiefang truck, CA-141 rolled out in 1988. In 1991, FAW formed joint venture with Volkswagen and began to focus on car manufacture. Since then, it has formed joint ventures with other automobile giants such as Toyota and Mazda. In the same time, FAW maintained its own car brand Hongqi since 1958. Through purchasing and expanding, it has become one of top three automobile manufacturers in China. (The other two are Shanghai Automotive Industry Corporation and Dongfeng Motor Corporation) By 2004, its car sales had passed 1 million units.

TATA MOTORS LIMITED

Tata Motors Limited is India’s largest automobile company, with revenues of Rs. 35651.48 crores (USD 8.8 billion) in 2007-08. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer.

The company’s 23,000 employees are guided by the vision to be “best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics.”

In January 2008, Tata Motors unveiled its People’s Car, the Tata Nano, which India and the world have been looking forward to. A development, which signifies a first for the global automobile industry, the Nano brings the comfort and safety of a car within the reach of thousands of families. When launched in India later in 2008, the car will be available in both standard and deluxe versions. The standard version has been priced at Rs.100,000 (excluding VAT and transportation cost).

With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.

TOYOTA Automobiles

Toyota is one of the world's largest automobile manufacturers, selling over 8.8 million models in 2006¹ on all five continents. A Top 10 Fortune Global 500² enterprise, Toyota ranks among the world's leading global corporations and is proud to be the most admired automaker³, an achievement the company believes stems from its dedication to customer satisfaction. Toyota has been shaped by a set of values and principles that have their roots in the company's formative years in Japan.

The Toyota story begins in the late 19th century, when Sakichi Toyoda invented Japan’s first power loom, which was to revolutionize the country’s textile industry. In January 1918, Sakichi founded the Toyoda Spinning & Weaving Company, and with the help of his son, Kiichiro Toyoda, he fulfilled his lifelong dream of building an automatic loom in 1924. Two years later, he established Toyoda Automatic Loom Works.

Like his father, Kiichiro was an innovator, and during his visits to Europe and the U.S. in the 1920s, he became deeply interested in the nascent automotive industry. Making the most of the £100,000 that Sakichi Toyoda received for selling the patent rights of his automatic loom, Kiichiro laid the foundations of Toyota Motor Corporation (TMC), which was established in 1937. From looms to cars, the Toyota experience has been shaped by extending the boundaries of manufacturing.

GENERAL MOTORS COROPORATION

General Motors Corporation (GM) is the world's largest full-line vehicle manufacturer and marketer. Its arsenal of brands includes Chevrolet, Pontiac, GMC, Buick, Cadillac, Saturn, Hummer, and Saab. Opal, Vauxhall, and Holden comprise GM's international nameplates. Through its system of global alliances, GM holds stakes in Isuzu Motors Ltd., Fuji Heavy Industries Ltd., Suzuki Motor Corporation, Fiat Auto, and GM Daewoo Auto & Technology. Other principal businesses include General Motors Acceptance Corporation and its subsidiaries, providers of financing and insurance to GM customers and dealers. In the early 2000s, struggling under the weight of escalating healthcare and pension costs, GM sought to shed some of its less profitable activities. Toward that end, among other moves, the company sold its stake in Hughes Electronics, phased out production of the Oldsmobile, and discontinued the Chevrolet Camero and Pontiac Firebird. Facing a tough economic climate, GM has nevertheless retained its position as the world's leading automaker.

THE VOLKSWAGEN (Automobiles) GROUP

The Volkswagen Group with it’s headquarter in Wolfsburg is one of the world’s leading automobile manufacturers and the largest car producer in Europe. In 2006, the Group increased the number of vehicles delivered to customers to 5.734 million (2005: 5.243 million), corresponding to a 9.7 percent share of the world passenger car market.

In Western Europe, the largest car market in the world, nearly every fifth new car (19.9 percent) comes from the Volkswagen Group. The turnover increased in 2006 to 104.9 billion Euro (2005: 95.3 billion). The result according to taxes amounted to 2.75 billion Euro in the last financial year (2005: 1.12 billion).
The Group consists of eight brands: Volkswagen, Audi, Bentley, Bugatti, Lamborghini, SEAT, Skoda and Volkswagen Commercial Vehicles.

Each brand has its own character and operates as an independent entity on the market. The product range extends from low-consumption small cars to luxury class vehicles. In the commercial vehicle sector, the product offering spans pick ups, busses and heavy trucks.

The Group operates 44 manufacturing facilities in 12 countries in Europe and in a further six countries in America, Asia and Africa. A workforce of over 325,000 people all around the globe produces over 24,500 vehicles per working day, as well as providing vehicle-related services. The Volkswagen Group's models are sold in more than 150 countries.

The aim of the Group is to offer attractive, safe, environmentally friendly vehicles which are competitive on increasingly tough markets and represent the global benchmark in their respective classes

MAJOR PLAYERS IN AUTOMOBILE INDUSTRY

JAPAN: Toyota (Lexus), Honda (Acura), Nissan, Mitsubishi, Mazda, Suzuki, etc

USA: General Motors Corporation (Buick, Cadillac, Chevrolet, Daewoo, Hummer, Holden, GMC, Saturn, Opel, Pontiac), Ford, Chrysler…

GERMANY: BMW, Mercedes Benz, Volkswagen Group (Audi, Bentley, Bugatti, Lamborghini, Volkswagen), Porsche…

CHINA: First Automobile Works (Besturn, Hongqui, Huali, Xiali), Chang'an Motors, Beijing Automotive Industry Holding Corporation, Dongfeng Motor Corporation, Chery Automobile, Shanghai Automotive Industry Corporation (SsangYong, MG, Roewe)

INDIA: Tata Motors Limited (Jaguar, Land Rover, Tata, Hispano), Mahindra & Mahindra Limited…

Automobile Industry

Industry that produces automobiles and other gasoline powered vehicles, such as buses, trucks, and motorcycles. The automobile industry is one of the most important industries in the world, affecting not only the economy but also the cultures of the world. It provides jobs for millions of people, generates billions of dollars in worldwide revenues, and provides the basis for a multitude of related service and support industries. Automobiles revolutionized transportation in the 20th century, changing forever the way people live, travel, and do business.

The automobile has enabled people to travel and transport goods farther and faster, and has opened wider market areas for business and commerce. The auto industry has also reduced the overall cost of transportation by using methods such as mass production (making several products at once, rather than one at a time), mass marketing (selling products nationally rather than locally), and globalization of production (assembling products with parts made worldwide). From 1886 to 1898, about 300 automobiles were built, but there was no real established industry. A century later, with automakers and auto buyers expanding globally, auto making became the world's largest manufacturing activity, with nearly 58 million new vehicles built each year worldwide.

Opputunites For Automobiles Industry

Automotive companies need to transform engineering research and development (ER&D) to be more effective in product creation, design and development is the top priority for the automotive industry.

However, the engine within a company – the ER&D organization that envisions, creates, designs and develops products – must be fundamentally changed.

Product creation is shifting from internally focused, closed door, invent-within to external collaboration, open platforms and joint development.

Green Technology Cars: Recently BMW is producing green manufacturing units which are easily recyclable it means that if they produce a cars its each part can be utilized afterwards so it’s a great opportunity for every automobile maker to use this technology in future to save the extra raw materials costs and to make highly productive cars in the future of automobile industry.

True Blue Solutions: The Daimler Group has given a new solution for future cars there will be no use of fuels in the cars, the Fuel-cell vehicle obtains its energy following a reaction between hydrogen and oxygen. Thus it’s a great step in the field of automobile industry to cop up the shortage of oil and other minerals.

Hybrid Technology: Hybrids combine a small combustion engine with an electric motor and battery. The two technologies can be combined to reduce fuel consumption and tailpipe emissions. Hybrids capture energy lost during braking and return it to the battery, called "regenerative braking." A hybrid engine also operates more efficiently and produces less pollution than does combustion alone.

There are many more opportunities for global automotive industry to save raw materials and labor costs to shift their manufacturing units towards India & China due to low costs tax and electricity free zones.

SOCIAL FACTORS

In Sociological factors female and men have different tastes most of the females go for fuel efficient cars mostly they do not care about the engine size they mostly like compact cars. The Volkswagen Beetle and Ford Mustang are the examples of famous brands sports cars and luxury cars. The age factor is also very important while designing among females. While Men mostly like the powerful and high performance cars like sports cars. The buying power has a great impact on the automotive industry that’s why cars, the middle age people like reliable and fuel efficient cars but the teenagers like high per capita income has more consumption of cars, like America, Eastern Europe and every any has launching Hybrid and fuel efficient cars. In the Middle East side people prefer heavy duty cars due to China. Every one prefers a car so it’s a great advantage for automotive makers to capture inexpensive fuel. The status conscious people in West prefer specific life styles, for Rolls Royse, Bentley and Jaguars. For instance people in America use limousines, and in England people like royal cars like Rolls Royse, Bentley and Jaguars.

TECHNOLOGICAL FACTORS

The future expected drivers for the global automobile industry are internet, telematics and other technological innovations. The era in which we are living is the era of being online or connected for that purpose mass customization is playing an important role by the automotive makers. Telematics is an art of using technology inside the vehicle. It is reported that such equipments might include enhanced mode of personal communication

(phone/fax, email), convenience facilities (travel and restaurant reservations, interactive shopping), safety sensors to ensure safe distance between adjacent vehicles, security aspects (stolen vehicle tracking), toll collection options and navigation (GPS locators with directions to destination). Also it helped the driver by giving accurate information about obstacles on the roadway, traffic jams, uneven road surfaces, etc.

On the other end the technological advancements in the designs of cars with less emission fuel technology and changes in the structure of engines of automobiles to get rid of minerals and fuels are taking place.

For instance hybrid vehicles and fuel cell technologies were regarded as the breakthrough innovations likely to alter the structure of the industry in the days to come.

Fuel-cell vehicle obtains its energy following a reaction between hydrogen and oxygen.

Hybrids combine a small combustion engine with an electric motor and battery. The two technologies can be combined to reduce fuel consumption and tailpipe emissions.

The hydrogen cars are another type of technology which is being used by American automotive makers recently launches 200000 lack cars with Hydrogen Fuel Technology and investing $1.3Billion to commercialize it. At the end of 2008 they are planning to launch 600000 more cars of the same technology.

Honda is aiming to launch a car with Hybrid technology by 2010 which can cover 1500 Miles with one fuel tank.

The bio fuel cars are playing an important role to cut down the fuel costs up to 60% which ca cover a distance of 60 miles in a gallon.

Recently Audi launches a car model R8 with a weight of 200Kgs it can reach up to 200 Km / Hour with a powerful road grip with such a light weight materials.

These kind of technological changes are breaking the old rules of automotive making…

IMPACT OF PEST ON AUTOMOBILE INDUSTRY

POLITICAL FACTORS

Political stability is the factor which plays a vital role in constructing or destructing the industries. China, Japan, India, and America all countries have stability in their politics which is actually promoting their automobile industries.

Automobile companies taking advantage of tax incentives and subsidies which governments are providing for example every big company is planning and ready to open in India and China why because of their government strict policies regarding the welfare of companies and subsidies which they are providing to manufactures like in China has given opportunity to work with utilities expense free manufacturing like they only need to have produce and so they can also produce on minimum cost so to compete in the market.

U.S. trade officials have negotiated trade agreements such as the Memorandum of Understanding with Korea (1993), the North American Free Trade Agreement (NAFTA, 1994), and the U.S.-Japan Automotive Framework Agreement (1995). These and other agreements have increased automobile and other exports to Japan, Mexico, and Korea.

All the big government is showing positive attitudes toward expanding the business and that is how the mergers of big names such GMC with Chrysler and Porsche with Volkswagen are taking place.

In Korea the whole transport industry is occupied by India Tata motors and it become possible because of the policy of Korean government that they wanted quality service from any country.

Some countries imposes high tax on export-import of automobile product which increases the price in domestic market like in Pakistan because of unfavorable policy regarding import of the car the price in domestic market is high.

ECONOMICAL FACTORS

Economy of the whole world is affecting by the current downfall in US economy because all the companies are somewhat involved with America so after American economy goes down the condition of whole world is depressed.

The sale figures of US and Germany are going down because of Inflation and stagnant income level at the same time. Rising imported car sales in the western countries manufactured by India and china is a threat for of U.S. automakers that is the reason why Toyota took over GM as the largest car seller because the way Japanese has built there economy it has become impossible to beat them.

Apart of Japan the economy of China is growing faster then Europe. The reason for China’s strong economy is the Subsidiaries which they are giving to their producers so that they are able to manufacture same product in all quality that is required by the buyer that is the way government tries to ensure the local manufacture’s profit from the foreign companies. China is basically competing on the low labor cost and increasing product quality which is now days become major issue. after china and Japan India ha also emerged as a leading economy in the regions because of that Indian economy is currently experiencing a boom in demand for all type of vehicles they are controlling there economy also by giving subsidiaries to producer so that they can give maximum output for example recently when there was an increase in patrol prices the India government doesn’t let it effect to the manufacturer.

The Crux of Automobile Indusrty In Pakistan

In our suggestion the in current circumstances Pak-Suzuki should close its operation because in coming years the technology on which global industry is competing will definitely through them out of the business, for example how can you compete with the cars having 1/4^rth of local car’s price and built on better technology
Another issue is that there is no obligation of having local car on government level like India has.

The only thing which is in SUZUKI motor’s favor is the non-implementation of WTO and as soon as WTO get implemented government of Pakistan as a member of WTO must have to make Pakistan a tax free zone on export and import and at that time who is going to purchase local cars as compare to China’s Dongfeng Motor Corporation and Indian’s Tata.motor, which are more cheaper more fuel efficient.

But if Pak Suzuki wants to remain in business then they should have to take following steps not to survive but to earn profits.

1. Pakistan government should provide subsidies so that they will be able to bring their prices down.

2. To minimize the production cost instead of waiting for political stability they must make their own plan on how to overcome the minimizing cost issue because with the implementation of effective supply chain plan they will be able to bring down their operating cost atleast to the level where they can compete on Maruti Suzuki.

3. They must think seriously replacing fuel technology other than Patrol and Diesel

4. They should make in agreement with Pakistani government that the cars which will be used on government level should be made in Pakistan (i.e. –Pak-SUZUKI) so that it will increase their share an will help in gaining the trust of the citizens of Pakistan.

5. To minimizing its operating cost up to 50 % Pak -Suzuki can built electricity producing plant i.e. by using garbage for producing methane gas which can be further used to make electricity in order to rely lesser on national resources like BMW is now having in plant in Germany and US.

6. Market expansion measures should be taken which will definitely benefit the industry, government and general public in terms of employment and price.

7. Volume of production should be increased in order to achieve the economies of scale. Localization should be increased and investments should be made to increase localization.

8. The government should also keep a close watch on new entrants so as to prevent reign Firms from dumping there vehicles to the Pakistan market.

9. The Vendor industry in Pakistan also plays a critical role in the growth of auto industry as all the component parts are not manufactured under one roof. Development of vendor industry in Pakistan would be able to expand the employment opportunities and reduce cost of production.

EFFECTS OF GLOBAL AUTOMOBILE INDUSTRY IN PAKISTAN

The Effect of Global trend on automobile industry will be against the Pakistan economy like the major trend is automobile industry on minimizing the cost , adopting latest technology and free export where Pakistan has all the factors going against for like manufacturing cant be minimized because the utilities expense is increasing day by day and except in the current scenario where the electric corporations not able to provide continuous electricity .If you talk about the latest technology then technology depends on the research and development where in Pakistan there is no working on research and development .To import a car there is a huge duty which they had to pay by the importer and in Pakistan import duties are up to 200% so the end consumer has to pay a lot more money to the original cost of the vehicle. Thus it is very hard to imagine that in such a high material, electricity, Taxes and Import duties costs it is very difficult to install or manufacture any units in Pakistan. On the other hand the uncertainty conditions where life is in danger of every human being so heavy investments are very much complicated. Suzuki is a company which is providing low cost quality vehicle so while working under the global changes trends Suzuki motors is doing exactly the same as they are doing for the last two decades they even not bother to change their models because the consumers demand is not as higher as in the other European, American countries etc where they are keep on changing.

In our opinion Pak- Suzuki Automotive industry won’t get affected to change in global trends the worst most possible condition will be that, the automotive units will be shut down in the country and the demand will be met by foreign countries and peoples who have the buying power they will import the cars from India china and rest of the world.

IS PAKISTANI ECONOMY DIFFERENT?

Global auto industry is thinking about how to create demand according to their capacity where Pakistani industry is unable to fulfill the current demand.

The current crises like energy and political instability is also contributing as severe hurdles in the development of Pakistan automobile industry.

The world automobile industry is competing on the base of price (which is the result of efficient production) Efficient fuel technology (which is the result of research and development) & durability (which is the result of quality production) and in Pakistan there isn’t the technology advancement so that you can come over fuel efficient cars.

A Suzuki 800cc car retails for about Rs300, 000 in Pakistan. In India the price is about Indian Rs210, 000 or about Pakistani Rs260, 000. This 15 per cent difference is common to all car brands and cannot be attributed to either super-profits or inefficiency of the Pakistani car manufacturers. It is the result of the subsidies available to the Indian manufacturers and to some extent their economies of scale.

The Vendor industry in Pakistan also plays a critical role in the growth of auto industry as all the component parts are not manufactured under one roof.

Development of vendor industry would be able to expand the employment opportunities and reduce cost of production. Transfer of the state-of-art technology from parent companies of Japan and Korea is one of the most important areas of automobile industry. Unfortunately, Pakistan has not been able to derive maximum benefits in terms of technical know-how, production technology, quality control, post-sale servicing, etc, to the mutual advantage of the manufacturer and consumer.

Apart of all those factors discussed above political stability is also playing negative role, Terrorism activities are key factor to identify any country’s political stability and under current scenario no investor is wiling to invest in the country and instead of investing the companies are working out on transferring the current plant to outside faculty where like other factors political stability is also there like in China ,Japan and India.

All above discussed factors are the reason which differentiate Pakistani automobile industry form global automobile industry.

IS PAKISTANI ECONOMY DIFFERENT?

Pakistani automobile industry is quite different from the global automobile industry mostly Pakistan motor industry is based on joint ventures

In Pakistan we first had Suzuki Company in mid-80 near Karachi. Later on we had Toyota (Karachi), KIA (Karachi) and Honda (Lahore) Companies. All of them build their popular compact sedans Corolla, Pride and Civic/City respectively; whereby all R&D is done in Japan/Korea and CKD's (Completely Knocked-Down) kits are shipped to Pakistan to assemble them into cars. All model changes and styling changes are initiated in Japan.
In other part of world the whole car is produced from research development to formation of the car is done on the same country Automobile plants in china and India are the live examples. Because of the level of commitment China’s Chery motor and India’s Tata motor (local companies) has emerged as a big threat to other big car manufacturers in the industry. Recently there was news that BMW is starting manufacturing in Pakistan but that plan doesn’t succeed.

If we take a comparison of Pakistan card industry with Global ca industry then we won’t find any kind of similarity except that after some calculated time the new model of SUZUKI MEHRAN is launched but with all same features just the difference is the new price and slight modification in outlook of the car that is how Pakistani car manufacturing is working out.

OPPURTUNITIES Available For Automotive Companies

Automotive companies need to transform engineering research and development (ER&D) to be more effective in product creation, design and development is the top priority for the automotive industry.

However, the engine within a company – the ER&D organization that envisions, creates, designs and develops products – must be fundamentally changed.

Product creation is shifting from internally focused, closed door, invent-within to external collaboration, open platforms and joint development.

Green Technology Cars: Recently BMW is producing green manufacturing units which are easily recyclable it means that if they produce a cars its each part can be utilized afterwards so it’s a great opportunity for every automobile maker to use this technology in future to save the extra raw materials costs and to make highly productive cars in the future of automobile industry.

True Blue Solutions: The Daimler Group has given a new solution for future cars there will be no use of fuels in the cars, the Fuel-cell vehicle obtains its energy following a reaction between hydrogen and oxygen. Thus it’s a great step in the field of automobile industry to cop up the shortage of oil and other minerals.

Hybrid Technology: Hybrids combine a small combustion engine with an electric motor and battery. The two technologies can be combined to reduce fuel consumption and tailpipe emissions. Hybrids capture energy lost during braking and return it to the battery, called "regenerative braking." A hybrid engine also operates more efficiently and produces less pollution than does combustion alone.

There are many more opportunities for global automotive industry to save raw materials and labor costs to shift their manufacturing units towards India & China due to low costs tax and electricity free zones.