Mitsubishi needs a plan, partner

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The economic woes of the auto industry have been cooling the merger and acquisition fever seen in the last five years, and this has the potential to slow down the sharing of platforms and other content among different car brands that results from such mergers.

The M&A slowdown comes at a precarious time when financially ailing Mitsubishi Motors Corp. is in need of a new dance partner. The Japanese carmaker has been spurned by former suitor DaimlerChrysler and its dance card is empty. Even former CEO Yoichiro Okazaki in Japan admitted Mitsubishi was in a bitter fight for survival.

Takashi Nishioka, former CEO of Mitsubishi Heavy Industries, took over as group CEO-chairman in January. Mitsubishi has lost money in four of the last seven years.

Analysts suggest the current economic climate doesn't favor new industry mergers and acquisitions of struggling companies like Mitsubishi. In an uncertain selling climate, all automakers are closely evaluating and monitoring their marketing and sales activities.

Traditionally, it would be one of the Big 3 to move on a weak or strong competitor, but giants like General Motors Corp. and Ford Motor Co. don't have the resources at the moment, analysts say. DaimlerChrysler, being shored up ironically by its U.S. Chrysler Group, already is shedding Mitsubishi like an unwanted winter coat. DaimlerChrysler continues to hold its 13% stake in Mitsubishi, down from 18% in February and all-time high of 34%, but has cut financial support.

GM, Ford and Chrysler were the M&A kings of the last five years. But things have changed.

"Toyota is getting stronger and stronger, as is American Honda Motor Co. You have to look at the need in China in the next 10 to 15 years. Whoever is strong there will be strong around the world," says Mark Santucci, president of Elm International, a global automotive researcher.

Mr. Santucci believes the industry is not likely to see M&As soon among sizable automakers. "There were many opportunities in the past. But Ford, GM and VW are not in a condition to acquire anyone at this time," he says.

In fact, GM and Ford "may try to unload some brands picked up," adds Bob Schnorbus, chief economist at J.D. Power & Associates.

"The industry, from (carmakers) to suppliers, has been under a lot of pressure for a long time. If the [automotive] market remains soft, it could cause more problems. A lot of companies don't have the depth to weather the [storm]," Mr. Schnorbus says.

GM is losing market share, with falling stock prices and slumping sales. Ford did major acquisitions 1999-2001, and also has marketing challenges. One analyst predicts Ford sales will drop 5%-7% this month vs. a year ago. Volkswagen of America, too, is struggling with its North American sales. DaimlerChrysler is done making acquisitions.

Mr. Schnorbus says a Toyota-GM merger or alliance "has been kicked around." GM and Toyota already have a long-term working relationship with the its first joint venture, the now-defunct Geo model line sold as Chevrolets, and now the Toyota Matrix-Pontiac Vibe brand.

Mr. Schnorbus cautions that auto watchers shouldn't throw the baby out with the bath water, or assume GM or Ford are going down.

"Each company is going through its own unique cycles-and that happens every couple of years. These are giants of industry. You've got to be careful in how you think about this. It's not necessarily going to continue," he says about Ford and GM's current financial straits.

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