Marriages made in hell

Task:
1. Read the article and translate it into Russian.
2. Make an annotation of the article.
The troubled history of carmakers' mergers
Mr Marchionne, the corporate troubleshooter, who, since 2004, has been
responsible for a highly successful turnaround at Fiat, has reached the conclusion that
volume carmakers will in future need to sell at least 5.5m vehicles a year to be viable.
He reckons that only those firms, such as Volkswagen and Toyota, which can extract
sales of around a million a year from each of a handful of expensively-developed
platforms (these are a cars architectural underpinnings, on which a variety of models
can be based) can hope to be consistently profitable.
Adam Jonas of Morgan Stanley questions Mr Marchionnes faith in scale,
suggesting it is a function of success rather than prerequisite for it and gives warning
that even successful mergers bring with them many hidden cost burdens (financial
and non-financial) and that these can spiral if things do not go well.
Sceptics say cross-border mergers in the car industry have a poor record. Their
doubts are rooted in experience. With the partial exception of the alliance formed
between Renault and Nissan a decade ago, auto-industry mergers usually go wrong
and destroy rather than create value. Two of the most notorious were the unhappy
marriages between BMW and the ailing British car firm, Rover, and Chryslers own
supposed merger of equals with Daimler-Benz. In both cases, the German premiumcar maker believed that it needed increased scale and that taking over a volume maker
would make this possible without a potentially risky brand extension.
In particular, BMW wanted a presence in the markets for small cars and for
SUVs, while Daimler thought that Chryslers brands were below Mercedess, but not
too far below and that it could learn from Chryslers skills as a low-cost producer
especially the way it handled supplier relationships and the speed with which it
brought new products to market.
Not only was the premise behind both mergers mistakenBMW and
Mercedes have subsequently discovered that their brands can be safely extended
much further than they had once believedbut the implementation was flawed from
the outset for not dissimilar reasons. Although Chrysler had given every appearance
of being in much better health than Rover (at the time of the merger with Daimler in
1998 it was one of the most profitable car companies in the world), both firms
suffered from fundamental weaknesses that their German owners, partly out of
mistaken tact and concern about provoking political hostility, acted only very
belatedly to correct. Instead of doing the difficult things immediately, they let things
drift.
In BMWs case, it should have concentrated all its resources on reviving Land
Rover and reinventing the Mini instead of lavishing resources on the dying Rover
brand. BMWs boss at the time, Bernd Pischetsrieder, believed that with BMWs help
Rovers could be exported as the slightly premium option in every segment, while
BMWs would be the sportier, more expensive choice of keen drivers. It was a fantasy
that masked the degree of Rovers weakness and diverted BMW from doing more
sensible things, such as consolidating purchasing and closing down the hopelessly
outdated Longbridge factory in Birmingham.

A further problem was a growing rift within BMW as to whether the English
Patient was worth the time and money it was absorbing. Far from ensuring BMWs
independence, Rover was imperilling it. In 2000 BMW finally extricated itself, paying
some former Rover managers to take the thing away, selling Land Rover to Ford and
keeping Mini. All told, the cost to BMW was about $7 billion and six years of
heartache and distraction.
Something similar happened to the ill-fated DaimlerChrysler. Because it was
meant to be a merger of equals and Chrysler was superficially in good shape when
they bought it, the Germans waited far too long before dealing with some fairly
obvious problems. Having allowed a leadership vacuum to develop at Auburn Hills
(Chryslers HQ) as senior American managers who had been enriched by the deal
drifted away, Daimler only acted to cut costs and capacity in late 2000 when the
market had turned down and Chrysler was burning cash at a rate of $5 billion a year.
But despite the best efforts of Dieter Zetsche, the Daimler manager sent out to get a
grip on things, the cultural chasm between the two partners became wider.
In a bid to centralise purchasing, Daimler undermined one of the best things
about Chrysler, its collaborative relationship with suppliers. Nor was there any
synergy between the departments developing new models. Daimler's engineers
thought Chryslers slapdash, while their American opposite numbers found them
arrogant and ignorant about the needs of volume manufacture. The hope that
platforms and powertrains would be shared was only implemented half-heartedly
the Germans in Stuttgart were reluctant to allow Chrysler technology they thought
should be reserved for premium Mercedes cars.
Worse still, during the nine years of the marriage with Chrysler, Mercedess
reputation for gold-standard quality took a battering. When in 2007 Daimler, now
being run by the same Mr Zetsche who had tried to save Chrysler six years earlier,
finally decided to bail out, its share price shot up. As a measure of the pitiful state in
which the Germans had left Chrysler, its new model pipeline was almost empty and
with only one or two exceptions the cars it was selling were old and uncompetitive.
The alliance between Renault and Nissan has, on the whole, been a much
happier affair, although it is no longer regarded within the industry as quite such a
shining exception as it was a few years ago when Carlos Ghosn, its architect, was the
most feted car boss in the world. The secret, according to Mr Ghosn, has been in
allowing the two companies to work as two distinct, but co-operating entities. He
says: You must be ambitious for the relationship, but not try to dominate or you will
pay for it afterwards. The alliance had taught Renault to become a global company
and taught Nissan to be much bolder. Its guiding principle is that each can benefit
from the others strengths.
For example, the alliance can boast class-leading powertrain technology
thanks to Renaults knowledge of diesel and Nissans highly-rated petrol engines and
gearboxes. The key from the outset has been the cross-functional and cross-company
teams, mainly of middle managers, set up by Mr Ghosn to engage in a permanent
quest for new synergies. There must be, he says, complete transparency and a shared
sense of purpose.
What Mr Ghosn could have added is that his own background (a Brazilian of
Lebanese descent who was educated in France and speaks five languages) may have
brought with it a cultural sensitivity that at times proved crucial. It is also almost
certainly the case that both Renault and Nissan really could see strengths in each other
they could learn from, whereas too many senior people at BMW and Daimler quickly
grew contemptuous of the companies they had bought and were bad at hiding it.

From The Economist

In the article under the title Marriages made in hell, published in the
Economist magazine the author makes an overview of mergers in a car manufacturing
industry. By exploring the cases of BMW-Rover, DaimlerChrysler and RenaultNissan he undertakes an attempt to understand what reasons are behind successful and
unsuccessful mergers.
According to the author in a pursuit of scale car manufacturers are using crossborder deals, which in most cases destroy rather than create value. Both mergers,
BMW-Rover and DaimlerChrysler, studied by the author failed due to inability of
acquirers management to identify duly the flaws in subsidiarys business and their
contemptuous attitude to it. Actions taken belatedly could not remedy the situation.
Both disasters developed in a similar scenario. After the acquisition of a
foreign company instead of taking real action to realise potential synergies, the
management let things slide. It was not only unable to detect the challenges their
newly acquired business were facing, but even undermined their competitive
advantages. When the situation became obvious, they tried to introduce some
changes. It was too late. Moreover this failure hurt the activities of the parent
company, as management and financial resources were diverted from it. Finally the
subsidiary, almost ruined, was sold with a significant loss.
However the author points out that not all mergers in carmakers industry are
set to fail. The key factor, that helped Renault-Nissan develop into a successful
coalition, was the ability of management to establish cooperation at a middlemanagement level, identify the strongest sides of both businesses and exploit them to
create successful products.