It Can Happen!

Luke Adkins

Dr. Greg Hoffeditz

Undergraduate Management Cluster

9/28/2006

It Could Happen!

Rumor has it that two of the largest automobile manufacturers in the United States could possibly merge, or at least form a partnership. The two giants are Ford Motor Company and General Motors. This is a very radical idea, given that the two have been intense competitors for the past century. While both companies are actively trying to change their old-school ways, the idea of a merge or alliance has many pros and cons.

The possibility of a merge seems very unlikely at this point. Experts predict that a merge could take up to ten years to complete and create a large number of secondary issues that would need to be resolved as well. One of the major issues of a merge is how many brands both of the companies would continue to operate. One would have to believe that some of these brands, such as Ford’s Lincoln/Mercury division and General Motor’s Pontiac and Buick divisions would not make the cut if a merge was to take place.

Another major hang up in a merge would be the possibility of loss of jobs between the two companies. If brands were to be cut, then it is almost certain that plants would close. That would be devastating for the company’s work force, because both companies have already started closing manufacturing plants across the country. Both of the manufacturers are suffering financially due to high wages and extremely generous health benefits.

Ford’s and General Motor’s poor financial standing right now is another reason why the merger is highly unlikely. A merger of this magnitude could take a decade to complete and that means that both companies could expect a rough transition period. Analysts are not sure that either company could stay afloat long enough to make it through a lengthy transition period. With foreign manufacturers already taking a huge share of the American automobile market, it is not likely that Ford or General Motors could afford any setbacks. Therefore, a merger could prove to be incredibly risky.

While there are many cons to a merger, there could be a lot of positives from the two companies joining forces. One might argue that cutting some brands and focusing resources and marketing strategies on just several vehicle lines may improve sales. Both companies could also benefit from a unified marketing strategy. Advertising is a very expensive and competitive side of the auto industry. If a merge was to happen, it would allow the companies to stop competing with each other and focus on other competition. But what seems to be the best idea and the most likely is that Ford and General Motors could form some type of partnership. Some experts feel this is one of the best options for the two struggling car companies.

The benefits of a partnership are numerous and there really isn’t a lot of downside to the idea. One of the biggest perks of a partnership would be the opportunity for the companies to share parts with each other. There are a lot of parts on a vehicle that are insignificant to the brand. These parts could be shared across the two companies and that could help drive costs down. Another perk of sharing parts is that the companies could work together to create superior parts and decrease manufacture malfunctions.

There are a lot of additional benefits from combining resources, such as pooling technology to work towards more fuel and environmental efficient vehicles. This is a very lucrative opportunity for the American car companies because the government is trying to pass a bill that would provide up to twenty billion dollars for development of environmental friendly vehicles. With the rise in gasoline prices, fuel efficient vehicles are in demand now more than ever. Sharing research and technology would surely put Ford and General Motors in a better position to compete with foreign auto makers such as, Toyota, Honda, and Nissan.

The overall global consensus is that Ford and General Motors is lacking in creativity and innovative ideas. If they were to form an alliance, they could start sharing concepts and ideas. Both companies have started to make drastic changes to their vehicle lines, to compete with the foreign auto makers. All the commercials promising exciting and new styles still might not be enough to succeed on their own if the quality is not up to par with the rest of the competition.

There is fear that a partnership could cause additional plant closures and more job loss. While that is a definite possibility, it may only be short term. Some would argue that if these companies want to move forward they will need to take a few steps back first. While this could be a