Car alliances

DaimlerChrysler has clearly decided it has lost enough time. Only hours after its U-turn on Chrysler’s future came reports that it may already be chatting with General Motors.

Investors would probably be unwise to read too much into speculation of full-scale merger talks. With their US market share eroding, GM and Chrysler might feasibly find a way round numerous antitrust issues. But Detroit’s Big Three all share the same problem – shrinking their capacity to keep up with falling volumes. That would be no easier after a deal.

In any case, top-level discussions on potential alliances are a regular occurrence in the industry. They are also likely to receive far more airtime following DaimlerChrysler’s announcement. Like its rivals, the carmaker is no stranger to collaborative efforts and already has partnerships in areas such as engine design, hybrid cars, even manufacturing models for competitors. Such deals can help at the margin, but a few more are unlikely to solve Chrysler’s underlying problems.

Arguably, Chrysler is in slightly better shape than its Detroit rivals. That could make it an attractive partner for a more far-reaching alliance. Investors should keep in mind, though, that automotive alliances are a bit like car-sharing. In theory, both have plenty of merits. But those who try rarely stick to it as their main mode of transport.

Among the many carmakers who have tried, only Nissan and Renault can claim some success – and even those two have recently hit some road blocks. Once those issues are solved, Chrysler might make a neat addition to the pair – especially if it is successfully restructured in the meantime. That would also leave Chrysler with a more attractive equity story for a spin-off. But while the chatter about link-ups is bound to continue, it will not be surprising if none materialise any time soon.