| BUSINESSWEEK ONLINE : DECEMBER 13, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN BUSINESS
DaimlerChrysler: Desperately Seeking an Ally (int'l edition) DaimlerChrysler needs an Asian carmaker to secure a foothold It was only last January that DaimlerChrysler co-CEO Jurgen Schrempp held court at the swank Tokyo International Forum conference hall. Amid displays of DaimlerChrysler technology like a fuel-cell-driven car and a jet plane, Schrempp boldly predicted that the auto maker would boost its Asia sales to 25% of the company total, from single digits today. ''The only problem is that we are a bit impatient,'' Schrempp declared. To get there, Schrempp and his entourage had come to Tokyo to inspect Nissan Motor Co. as a possible partner in Daimler's great Asian offensive. Daimler ultimately passed on investing in Nissan, giving French rival Renault a chance to forge an alliance with the beleaguered Japanese auto maker. But that's hardly the end of Daimler's Asian saga. If anything, signs are multiplying that Daimler's hunt for an Asian deal is gaining momentum again. On Nov. 25, the Tokyo-traded shares of Honda Motor Co. jumped 6%, to $44, on a report that Daimler was about to take a stake in the Japanese carmaker. Honda denied any deal was in the offing, but Daimler is clearly looking: Mitsubishi Motors Corp. confirms that the Germans have come calling. Daimler is looking for a boost in Asia--and fast. ROCKY ROAD. It's easy to see why. Both Japan and the rest of Asia are coming out of their economic slumps. Falling trade barriers make the world's biggest potential vehicle market even more alluring. By 2009, Asian car and truck sales are expected to grow by 75%. Yet Daimler's overall market share in Asia, including Japan, is just 1.3%. True, Japanese sales of Mercedes rose 33% in the third quarter, to 10,600 cars, led by the compact A-Class. But in Thailand, Mercedes' market share has slumped to an estimated 1.6% this year from 4.3% in 1997 because of disputes with its local partner. During the same period, German rival BMW more than doubled its share, to 3.8%. In China, a rocky joint venture that produces Chrysler's four-wheel-drive Cherokee has seen sales slump by more than half since 1997. And in midsize and heavy trucks, a business Daimler prizes, Volvo Trucks has a big headstart. ''There are some parts of the world where we are not represented the way we should be, primarily Asia,'' concedes DaimlerChrysler Chief Financial Officer Manfred Gentz. So Daimler wants to play catch-up. Top executives now figure that the bulk of the onerous detail work required by the merger with Chrysler is done. With that distraction out of the way, accelerating the Asian strategy is now imperative. Daimler execs may also be wondering if they should have taken on a deal with Nissan after all. Renault will become a powerful player in Asia if its cleanup of Nissan succeeds. Daimler's basic strategy in Asia focuses on trucks, but it's also trying to boost demand for its luxury cars among Asia's growing upper class. Emerging markets usually prove fertile territory for truck and luxury car sales before they develop brisk consumer demand for midprice sedans. Missing in this game plan is a small car for the masses. But Chrysler's expertise--perhaps linked with an Asian carmaker--could fill that gap. The big question is how to go about it. One alternative is to build an Asia presence slowly and expensively from the ground up, establishing factories and dealerships in the region. The other choice: invest heavily in a local Asian player to gain marketing and manufacturing clout. REBUFFED. It's clear Daimler is trying the latter route. Industry sources indicate that Daimler did try to discuss some linkup with Honda, but Honda swears no deal is possible. It vows to go it alone. ''President [Hiroyuki] Yoshino keeps saying he doesn't want to talk about a [tie-up],'' says a company spokesman. As for reports Honda is talking to General Motors Corp. about sharing engine technology, the Japanese company says that doesn't mean a major partnership is likely. Daimler has also approached Mitsubishi Motors, which is battered but has a big presence in Asia and a good truck division. Yet Mitsubishi rebuffed a Schrempp protege who suggested the companies cooperate in the truck business. ''They tried to have some discussion with me,'' says President Katsuhiko Kawasoe. ''I told them we are now chatting with Volvo,'' which shares manufacturing facilities with Mitsubishi in the Netherlands and owns 5% of the Japanese carmaker. The rebuffs by the Japanese leave Daimler in a tight spot, at least for the moment. Ford and General Motors are already tightening ties with Asian partners, including Mazda, Daewoo, and Isuzu. Fuji Heavy Industries, maker of Subaru, is profitable and unlikely to welcome absorption by DaimlerChrysler. ''They'd better be there soon if they don't want to be locked out,'' warns Ashvin D. Chotai, auto analyst at Standard & Poor's DRI. But it's not too late for Daimler. It's potentially a highly attractive partner, with world-class technology and $8.2 billion in cash. And there are other quarry to pursue. Daimler may take another look at Nissan Diesel, for example. In March, Daimler passed up a chance to buy the truckmaker, which is saddled with $4.9 billion in debt. Troubled as it is, Nissan would at least boost DaimlerChrysler in the Asian truck market. Renault may still try to fix Nissan Diesel. But if Nissan Diesel slides into bankruptcy, Daimler may have a chance to buy control and launch a rescue operation. Korea is another option. DaimlerChrysler already owns 3% of Ssangyong Motor Co., controlled by insolvent Daewoo Group. Ssangyong makes cars using Mercedes technology and sells vans that Daimler sells under the Mercedes brand name in Southeast Asia. Analysts say DaimlerChrysler might be interested in Ssangyong at a fire-sale price. And in a sign of its optimism that an Asian deal can still be done, DaimlerChrysler is recruiting Japanese-speaking Americans. It's ''pure speculation'' to conclude the hiring signals an imminent acquisition, Daimler says. Still, executives boast that the company is ready for another big move. And that move may well be in Asia. By Jack Ewing in Frankfurt and Emily Thornton in Tokyo, with Moon Ihlwan in Seoul _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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