Manufacturer Alliances: Good or bad?


General Motors Corporation exhibit showing the Firebird III, Century 21 Exhibition

The recent announcement by PSA and GM of their intended strategic alliance is one of many such alliances between various manufacturers.

But when do these alliances start diluting brand equity?

In the past the first tentative alliances were based on purchasing power formats. Then the inevitable creep sets in with manufacturers sharing platforms, major components, engines and indeed entire vehicles.

There are a myriad of examples these identical twins:

• Mercedes-Benz Sprinter and Volkswagen Crafter

• Citroen C1, Peugeot 107 and Toyota Aygo.

• Fiat Ducato and Peugeot Boxer

• Renault Trafic, Opel Vivaro and Nissan Primastar

• Ford Galaxy and Volkswagen Sharan

• Renault and Dacia Sandero, Logan (have not even changed the model name!)

• Daewoo and Chevrolet shared complete model line-ups

These are just a few examples of completely shared vehicles, but the lunacy continues with arch rivals becoming strange bed-fellows. I’m sure most owners of Volvo, Land Rover and Jaguar are not aware that the majority of their diesel engines are supplied by Peugeot. Mercedes-AMG is in talks to supply their power plants to Renault / Nissan which may see them in vehicles such as the Infinity’s IPL performance line. Naturally, Renault has reciprocated with the supply of 1.6 Litre diesel engines for Merc’s new A and B-Class platform.

In fact, I’m starting to wonder if the manufactures have stopped designing vehicles altogether and have merely become brand custodians. Think of any new technology from driver assistance packages, drive trains, active safety systems, lights, transmissions, multi-media units – even exhaust systems are all developed by independent suppliers, with the various manufacturers merely picking them off the shelf and implementing them into their cars.

Some vehicles are not even manufactured by the alleged manufacturer! The Mercedes-AMG SLS, Aston Martin Rapide, Mini Countryman, Mercedes-Benz G-Class and the Peugeot RCZ are built by Magna Styer in Austria. In fact Magna Styer have previously manufactured the BMW X3 (2003 – 2010), Jeep Commander (2006 – 2010), Jeep Grand Cherokee (1994 – 2010), Chrysler 300 C (2005 – 2010), SAAB 9-3 convertible (2003 – 2009), Mercedes-Benz E-Class 4Matic (1996 – 2006), Mercedes-Benz M-Class (1999 – 2002), Audi A8L (1990 – 1994) and the Volkswagen Countryman (1990/1991).

If you ever wondered how all of this is diluting brands, I will share with you a time when I was speaking to a friend of mine who was driving a Mini Cooper. While he was beaming at his Mini, I informed him that the previous Cooper had a Dodge engine in it and the current one had the same engine as the Peugeot 207 GTi. And you guessed it; the new Mini HDI has a Peugeot diesel in it. The look on his face was priceless! Sadly, his impression of the Mini dropped considerably to the point of concern and he spluttered “how can BMW and Mini do this to me?”

In parting, my other friend (of the fairer sex) who thought she was driving a VW Corolla may just have possessed a monumental bit of insight!

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  1. Hi Peter,
    good article, I agree completly with you.
    I’d like to see the face of your friend…


  2. Peter Viljoen says:

    Thanks Pietro – yes, my friend looked like he had just been dumped by his girlfriend!

  3. carlo says:

    Hi Peter,

    alliances are a matter of people not of products or brand. If good people join good people the partnership will create additional values for them, for their companies, for Brands, Shareholders and clients.

    GM/PSA will have enough talented people to create a win-win situation? That’s the question.

  4. Peter Viljoen says:

    @ carlo:
    Hi Carlo,

    Alliances definitely work to save OEM’s money – that is not the debate.My concern though is whether alliances will ultimately dilute brand equity. For example, the French brands have a very poor reputation in South Africa. Now Mercedes-Benz are using Renault engines in their A and B-Class. I can assure you when customers find out they will not be happy with Mercedes-Benz!

  5. Randal Long says:

    There can be an upside to this. If Jeep announced that that were using a more reliable transmission in their cars from a partner, I would feel better about buying a Jeep. You can take this example and apply to many other cars. Today many of the car components used by many brands that are designed and built by major sub-contractors Simmons, Valeo, ZF etc. This does not degrade the brand if these subsystems are integrated in a way to make a better whole.

  6. Peter Viljoen says:

    @ Randal Long:
    Hi Randal, agreed – if the OEM’s use better components there is definitely an upside. The critical part here is that the supplier is an independent party and not part of another brand. Still begs the question though: are brands loosing their DNA?

  7. Giovanni Bravin says:

    Peter Viljoen wrote:

    …. For example, the French brands have a very poor reputation in South Africa.

    If I may add comments, on the above, I would say that French brands had a poor reputation in South Africa, due mainly to the native’s culture and traditions. The same thing happened to Volvo, Saab, and other European and American brands.
    Toyota sells well in all Africa, and French brands have a good market in all Northern Africa. As a matter of fact, Peugeot sold to Egypt their plants to build cars that were outdated in Europe (504 type and similar).

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