5 Fiat-PSA

of 10

  • date post

    10-Apr-2018
  • Category

    Documents

  • view

    220
  • download

    0

Embed Size (px)

Transcript of 5 Fiat-PSA

  • 8/8/2019 5 Fiat-PSA

    1/10

    ~ Perg am o nEuropean Manageme ntJournalVol. 15, No. 1, pp. 35-44, 1997Copyright 1997 ElsevierScienceLtdPrinted in G reat Britain. All rights reservedS 0 2 6 3 - 2 3 7 3 ( 9 6 ) 0 0 0 7 2 -2 0263-2373/97 $17.00+0.00

    C o - o p e r a t i o n i n a N i c h eM a r k e t :T he C ase of F iat and P SAin Mult i Purpose VehiclesDOMINIQUE JOLLY, Professor and Head of Research, Groupe ESC Grenoble, France~

    S t i m u l a t e d b y t h e s u c c e s s o f R e n a u l t i n E u r o p e a n dC h r y s l e r i n N o r t h A m e r i c a , P S A a n d F i a t d e c i d e d t oe n t e r t h e e m e r g i n g m u l t i p u r p o s e v e h i c le m a r k e t b yf o r m i n g a n a l l i a n c e t o d e s i g n , d e v e l o p a n dm a n u f a c t u r e a n e n t i r e l y n e w v e h i c l e .T h e s t u d y o f th i s c a s e s h o w s t h a t t h e n a r r o w n e s s o ft h is s e g m e n t c o m b i n e d w i t h a g r o w i n g e n t r y c o s tr e d u c e t h e p o s s i b i l i t y o f a u t o n o m o u s m o v e s . A s ac o n s e q u e n c e , t h e a l l i a n c e h a s m a i n l y b e e n d e s i g n e df o r s h a r in g i n v e s t m e n t s a n d r i s ks , a n d f o r g a in i n ge c o n o m i e s o f s c a l e i n a j o i n t p l a n t . A s s u c h , i t o f f e r sa t y p i c a l e x a m p l e o f a s c a l e a l l i a n c e . H o w e v e r , w es t r e s s t h a t t h o s e b e n e f i t s a r e c o u n t e r b a l a n c e d b y t h ef a c t t h a t w h e n t h e a l l i e s g o b a c k t o c o m p e t i t i o n f o rc o m m e r c i a l i s i n g t h e v e h i c l e s i n t h e i r r e s p e c t i v ed i s t r i b u t io n n e t w o r k s , t h e y o f f e r q u i t e s im i l a rp r o d u c t s . I t s h o w s h o w f a r s c a l e a l l i a n c e s a r e c o n -s t r a i n i n g ( f o r e x a m p l e , r e d u c i n g i n d u s t r i a l d i v e r s i t y )a n d r e d u c e t h e s p a n o f d i f f e r e n t i a t i o n .

    T h e t w o p a r t n e r s a g r e e d t o e n t r u s t P S A w i t h t h ed a y - t o - d a y m a n a g e m e n t o f t h e a l li a nc e . A s F ia t h ass i m i l a r r e s p o n s i b i l i t y f o r a p r e v i o u s o n g o i n ga l l i a n c e w i t h P S A i n l i g h t t r u c k s , t h e n e w d e a l i nm u l t i p u r p o s e v e h i c l e s a l l o w e d t h e t w o p a r t n e r s t ob a l a n c e t h e i r r e s p e c t i v e p o w e r s a n d t o c r e a t e m u t u a ld e p e n d e n c e b e t w e e n t h e m s e l v e s . T h i s o r g a n i s a -t i o n a l f o r m d e m o n s t r a t e s h o w i t i s p o s s i b l e t os o l v e c l a s s i c a l p r o b l e m s i n a l l i a n c e m a n a g e m e n t ,t h a t i s , t o l i m i t t h e p r o b a b i l i t y o f o p p o r t u n i s t i cb e h a v i o u r s . T h i s c a s e a l s o s h o w s t h a t d e d i c a t i n g t h em a n a g e m e n t o f t h e a l li a n ce t o o n e p a r t n e r n o t a b l yp r e v e n t s t h e p a r t n e r s f r o m l e a r n in g f r o m e a c h o t h e r .C o p y r i g h t 1 9 9 7 E l s e v i e r S c i e n c e L t dPSA and Fiat are two European car manufacturers eachproducing more than two mil l ion vehicles per year . In

    1988, they decided to jo in forces in order to en ter in toth e em erg in g m u l t i p u r p o s e v e h i c l e (MPV) market. Sixyears later, after jointly committing 5 bill ion francs (US$1 b i l l ion) in the design , development and test ing of aco m p le t e ly n ew MPV m o d el an d in v es t i n g t o g e th er 6bill ion francs (US $1.2 bill ion) in an entirely new factorydedicated to th is vehicle , the two par tners s tar ted top en e t r a t e t h e seg m en t . Ho wev er , co -o p era t i o n en d s a tthe factory 's door and the par tners go back tocom petitio n at the commercialisation stage. In Europe,au to-makers usual ly co-operate on speci f ic sub-systems,i .e . engine, gear-box , ev en pow er- t rains or p lat forms, bu trarely on the whole vehicle (Henaul t , 1996) . Themagni tude of the deal , the lack of exper ience of thetwo par tners in the MPV f ield (no more than technicalscanning) and the profiles o f the tw o allies (privatecompanies where the equi ty i s main ly held by famil ies)make the move remarkable.The object ive of th is pap er i s to use the PSA-Fiat case fordrawing lessons wi th respect to al l iance management .Th e s tu d y i s b ased o n in -d ep th i n t e rv i ews wi th g en era lmanag ers at PSA and F iat , indust ry exper ts 2 and anextensive business and special i s t p ress rev iew. Somewel l -d o cu m en ted cases h av e a l so b een u sed fo rcomparison . Our analysis al lows us to in fer four lessonsthat wi l l be developed in the tex t :1 . the decis ion of PSA and Fiat to co-operate has beeninf luenced largely by the uncer tain t ies resu l t ing f romthe smal l s ize of the emerging MPV segment inEurope and the growing cost o f en t ry in th is newfield;2. this deal offers a typical example of a scale alliance(according to the definitions usually used in the inter-

    firm alliance li terature), where most decisions havebeen const rained by th is ob ject ive;3 . benef i t ing f rom scale effects at the development and

    European ManagementJournalVo115 N o 1 F e b r u a r y 1 9 9 7 3 . 5

  • 8/8/2019 5 Fiat-PSA

    2/10

    CO-OPERATION IN A NICHE MARKET

    t he m anuf ac t u r i ng s t ages i s neve r t he l e s s coun t e r -b a l a n ce d b y a w e a k d i f fe r e n ti a ti o n b e t w e e n p r o d u c t sd i s t r i bu t ed t h r ough f ou r d i s t r i bu t i on ne t w or ks unde rf ou r d i f f e r en t b r and nam es ;4 . t he a l l i e s have f ound a ve r y i n t e r e s t i ng w ay t op r ec l ude oppor t un i s t i c behav i ou r s ( w h i ch a r e a

    t yp i ca l p r ob l em i n a l l i ance m anagem en t ) bu t w h i chdo no t a l l ow one a l l y t o l e a r n f r om t he o t he r .T h e c o n j u n c t i o n o f th e s e t w o i n n o v a t i o n s le a d s t o M P Vca r s s how i ng t he f o l l ow i ng f ea t u r e : a m odu l a r pa s s enge rcel l wi th a l a rge capaci ty for people (up to 7 or 8 sea t s )and / o r l uggage , t oo l s o r l e i s u r e equ i pm en t . Th i sde f i n i t i on pos i t i ons t he veh i c l e be t w een t h e van an dt he p r i va t e ca r ( s edan t ype ). Tho s e veh i c le s i nc r ea s i ng lyt e n d t o a d o p t a n u n b r o k e n b o d y ( u s u a l l y e g g - s h a p e d )f r om t he r ad i a t o r g r i l l t o t he r ea r w i ndow .A t t he f i r s t i n t r oduc t i on o f t he MPV concep t , f ew ca rm anuf ac t u r e r s w e r e con f i den t i n i t s deve l opm en t . Theunce r t a i n t y w as m or e r e l a t ed t o t he l eve l o f dem and ( i nv i ew o f t he new nes s o f t he concep t ) t han t ot echno l og i ca l cons i de r a t i ons . I t w as e s pec i a l l y t r ue f o rPSA an d F i at . A t t he beg i nn i ng o f t he 1980s , PSA - -w h i c h w a s l o si n g m o n e y - - e v e n t u r n e d d o w n t h e o ff e ro f Ma t r a - A u t om ob i l e s t o f o r m an a l l i ance on i t s MPVprojec t (an d prefer red to inves t in a smal ler car of i ts ow n- - t he 205) .

    A r r i v a l o f N e w E n t r a n t sA s t he s ucces s o f C hr ys l e r w i t h i t s m i n i - van i n N or t hA m er i ca and R enau l t w i t h i t s Es pace i n Eu r ope becam em or e and m or e m an i f e s t , c a r m anuf ac t u r e r s abs en t f r omt he s egm en t began t o r ea l i s e t ha t t h i s abs ence caus ed ar ea l l a ck i n t he i r p r oduc t po r t f o l i o com par ed t o o t he rcompet i tors . PSA and Fia t , in par t i cular , were surpr i sedby t he s ucces s o f t he i r com pe t i t o r s w i t h t he s e k i nds o fp r oduc t s .S i nce t he b i r th o f t he MPV concep t , t he N or t h A m er i canm ar ke t ha s s how n t he l a r ge s t m i n i - van vo l um es i n t hew or l d . A t t he end o f t he 1980s , m i n i - van s a l e s g r ew by1 5 p e r c e n t p e r y e a r ; t h e y e v e n d o u b l e d b e t w e e n 1 9 9 0and 1993 . The s ucces s o f C hr ys l e r r evea l ed t hea t t r ac t ivenes s o f t he s egm en t . N o f ew er t han 20 m ode l s 3

    private cars(sedan t ype) M P V va n

    CHRYSLER MINI-VAN (1983)

    M A T R A - R E N A U L T E S P A C E1 9 8 4 ~F i g u r e 1 T h e M P V C o n c e p t

    a r e now o f f e r ed on t he N or t h A m er i can m ar ke t . Thet o t a l m a r ke t now exceeds one m i l l i on veh i c l e s pe r yea r(about 10 per cent of the car market ) .

    A R e l a t i ve l y N arrow Segment i n E uropew i th a Grow i ng E ntry C os tThe text wi l l f i r s t cas t a l ight on the l i fe cycle of theMPV s egm en t . We w i l l s ee t ha t t he b i r t h phas e o f t heM P V h a s b e e n d r i v e n b o t h b y C h r y s l e r i n N o r t hA m er i ca and by Ma t r a - R enau l t i n Eu r ope . Thes e t w oi nnova t i ve p i onee r s l a r ge l y con t r i bu t ed t o t he de f i n i t i ono f t h i s new veh i c l e concep t and t ook no t ab l e advan t ageo f t he i r advance . The g r ow t h phas e ha s been s us t a i nedb y a f l o w o f n e w e n t ra n t s - - o n c e t h e c o n c e p t g a in e dr e c o g n i ti o n - - a t tr a c t ed b y t h e h i g h e r g r o w t h r a te o ft h i s s egm en t ( com par ed t o t he t r ad i t i ona l s egm en t s o ft he au t om ob i l e i ndus t r y ) . A l l t he s e new com er s m od i f i edt he env i r onm en t a l cond i t i ons i n t he m ar ke t . D em and hasbeen s t i m u l a t ed by t he i nc r ea s i ng r ange o f p r oduc t so f f e r ed . S i m u l t aneous l y , p r i c i ng i s becom i ng a m uchmore ser ious i ssue .PSA and F i a t c le a r ly be l ong t o t he s econd w ave o f au t o -m ake r s a r r i v i ng a t t he g r ow t h s t age o f t he p r oduc t l i f ecyc le . Th ey r eached t he m ar ke t o f MPV s t en yea r s l a t e rt han M a t r a - R enau lt . We w i l l s t re s s t ha t t he e n t r y cos t a tth i s s tage , in a segment tha t s t ays as a n iche market , i s as t rong incent ive to es tabl i sh co-opera t ion, tha t i s tos p r ead s ubs t an t ia l i nves t m en t s .

    E m e r g e n c e o f t h e M P V C o n c e p tC hr ys l e r i s gene r a l l y r ecogn i s ed t o have l aunched t h i sk i nd o f veh i c l e a t t he beg i nn i ng o f t he 1980s . A t t ha tt i m e , i n t he con t ex t o f s e r i ous t r oub l e s i n t he N or t hA m er i can ca r m anuf ac t u r i ng i ndus t r y , bu t a l s o i n t hecom pany i t s e l f , C h r ys l e r had p r obab l y been s t i m u l a t edf o r innova t i on . Launched i n 1983 on t he U S m ar ke t a t apr ice c lose to tha t of s ta t ion wagons , i t s mini -van hasach i eved s t r ong com m er c i a l s u c c e s s . 4 I t i s tha t verys ucces s t ha t ha s s u r p r i s i ng l y a l l ow ed t he com pany t or ecove r . A t i ts o r i g in , t he m i n i - van i s no m or e t han a va n( i .e . a u t i l i ty vehic le) tha t has been shor tened and wherew i nd ow s and s ea t s have bee n i n s t a ll ed - - a s il l u s tr a t edin Figure I . But , the s t ruc ture of the vehic le s tays tha t ofa van: inf lexible rear axle , l eaf - spr ing suspens ion.I n Eur ope , t he MPV concep t i s u s ua l l y a s s oc i a t ed w i t ht he M a t r a - R enau l t Espace . The concep t o r i g i na t ed i n t heca r d i v i s i on o f t he Ma t r a G r oup a t t i m es w he r e t h i ssubs idiary was c lose to bankruptcy. Since i t s l aunch in1984 , t he ca r ha s m a i n l y been r ~anu f ac t u r ed by Ma t r a -A u t om ob i l e s , 5 bu t d i s t r i bu t ed and com m er c i a l i s ed byR enau l t . A s t he expe r i ence o f Ma t r a - A u t om ob i l e s i sr oo t ed i n t he de s i gn o f s po r t s and r ec r ea t i ona l c a r s( p r oduced a t ve r y l ow vo l um es ) , i t is no t s u r p r is i ng t ha tt he MP V i t de s i gned i s c lo s e r to s edan t ype car s t han t ovans ( see Figure 1) . Since i t s b i r th , the t echnologica l

    36 European ManagementJournalVot15 No 1 February 1997

  • 8/8/2019 5 Fiat-PSA

    3/10

  • 8/8/2019 5 Fiat-PSA

    4/10

    C O - O P E R A T I O N I N A N IC H E M A R K E T

    T a b l e 1 T w o K i n d s o f A l l i a n c e sJoffreand K oen ig (1984)Hen nar t (1988)Rober tsand M izou ch i (1989)Dussaugean d Garret te (1991)

    s i m i l a r i t ycooperationsca le JVsr e s o u r c ea c c u mu l a t i o nv e n t u r e ssca lea l l i a n c e s

    differencecooperationl i n k J Vsr e s o u r c ec o m p l e m e n t i n gv e n t u r e sc o m p l e m e n t a r ya l l iances

    T h a t i s w h y w e w i l l d i s t i n g u i s h h e r e a f t e r b e t w e e n ' s c a le 'a n d ' s y m b i o t i c ' a l l i a n c e s ( A d l e r , I 9 7 9 ) . T h e d i s t i n c t i o nb e t w e e n t h e s e t w o t y p e s o f a l li an c es s t e m s f r o m t h et y p e o f a d v a n t a g e s t h a t a l li e s a r e l o o k i n g f o r . T h e f i r s tk i n d l o o k s a t q u a n t i t a t i v e c o m p l e m e n t a r i t y o n e s , w h i l et h e s e c o n d l o o k s a t q u a l i t a t i v e o n e s . C o m p l e m e n t a r i t ys c a le a ll i an c e s o c c u r w h e n s o m e f i r m s p o o l s i m i l arr e s o u r c e s t o s a v e o n o r t o r e a c h a c r i t i c a l m a s s( o t h e r w i s e u n r e a c h a b l e ) . U s u a l l y , f i r m s f o r m i n g s c a l ea l l i a n c e s b e l o n g t o t h e s a m e i n d u s t r y , s h o w c o m p a r a b l ep r o f i l e s o f r e s o u r c e s a n d f a c e t h e s a m e k i n d o f p r o b l e m s .S e v e r a l c o m p e t i t o r s m a y , f o r e x a m p l e , jo i n f o r c e s t oi n c r e a s e t h e i r m a r k e t p o w e r s o a s t o p r o m o t e a s t a n d a r di n t h e i r o w n i n d u s t r y . S y m b i o t i c a l li a n ce s o c c u r w h e nf i rm s c o m b i n e r e s o u r c e s o f a d i f fe r e n t n a t u r e o r r e s o u r c e st h a t a r e h e l d u n s y m e t r i c a l l y b y t h e p a r t n e r s . E a c h f i r mb r i n g s a d i f f e r e n t s t r e n g t h . U s u a l l y , f i r m s f o r m i n gs y m b i o t i c a l l i a n c e s b e l o n g t o d i f f e r e n t i n d u s t r i e s o r a r ep o s i t i o n e d a t d i f f e r e n t s t a g e s o f t h e s a m e b u s i n e s s c h a i n ;t h e y a r e n o t d i re c t c o m p e t i t o r s . C o n s e q u e n t l y , t h e i rp r o b l e m s a r e n o t n e c e s s a r i l y i d e n t i c a l a n d t h e n a t u r e o ft h e i r m o v e s t h r o u g h t h e a l l i a n c e i s d i f f e r e n t .T h i s s e c t i o n w i l l s h o w t h a t t h e a l l i a n c e b e t w e e n P S A a n dF i a t i n th e M P V s e g m e n t o f f e r s t h e t y p i c a l e x a m p l e o f as c a le a l li a nc e . W e w i l l s e e t h a t e v e r y f e a t u r e o f t h e d e a l,

    a n d e v e r y d e c i s i o n t a k e n h a s b e e n d e v o t e d t o t h i so b j e c t i v e . M o r e o v e r , w e w i l l s t r e s s t h a t t h e a i m o f t h i sd e a l is c o m p l e t e l y d i f f e r e n t fr o m o t h e r a g r e e m e n t s i n th es a m e i n d u s t r y .

    Looking for Sca le EffectsA s s h o w n i n F i g ur e 3 , t h e P S A - F i a t al li a n ce o n M P V i sa i m e d a t o b t a i n i n g s c a le e f fe c t s . W e w i l l d e v e l o p t h e s ea r g u m e n t s b e l o w .Sharing cos t and riskT h e p o i n t d e v e l o p e d i n t h e p r e v i o u s s e c t i o n i s t h a t t h ei n i t i a l i n v e s t m e n t r e q u i r e d n o w r e a c h e d h i g h l e v e l sb e c a u s e t h e s e c t o r i s n o l o n g e r i n i t s i n f a n c y . I t w o u l dn o t h a v e b e e n a p r o b l e m i n h i g h v o l u m e s e g m e n t s( s u c h a s i n t h e C l i o , 1 0 6 o r P u n t o r a n g e ) . C o n s i d e r i n gt h e r e l a t i v e l y s m a ll s i ze o f t h e s e g m e n t o f M P V s , i .e .t h e n a r r o w n e s s o f t h e m a r k e t i n E u r o p e , m a n u f a c t u r e r sh a v e a s t r o n g i n c e n t i v e f o r c o - o p e r a t i o n i n s h a r i n g t h ed e s i g n ( R & D ) a n d m a n u f a c t u r i n g c o s t s .Gaining economies of scaleI n t h e a u t o m o b i l e i n d u s t r y , a s i n m a n y i n d u s t r i e s , c o s td e c r e a s e s w i t h t h e c a p a c i t y o f t h e p l a n t . B y a d d i n g

    s h a r i n g t h e r is k sa s s o c i a t e d w i t ht h e p r o j e c ti n c r e a s e in t h en e g o t i a t i o n p o w e r

    v is -a -v ist h e s u p p l i e r s

    s h a r in g t h e c o s t so f t h e i n v e s t m e n t in :d e v e l o p m e n t( 5 b i l l io n F . )& m a n u f a c t u r i n g( 6 b i l l i o n F . )

    uni t A e c o n om i e stic ,,0 | ~ o f s c a l eCso0/I I r - - - _

    250 SO0 c a r spe r day

    F i g u r e 3 C o m p l e m e n t a r i t y b e t w e e n P a r t n e r s O c c u r s o n Q u a n t i t a t i v e A s p e c t s

    .38 European ManagementJournalVo115No 1 February 1997

  • 8/8/2019 5 Fiat-PSA

    5/10

    CO-OPERATION IN A NICHE MARKET

    their respective production capacit ies in the samefactory, PSA and Fiat are able to reach a larger scalec o m p a r e d t o a s i t u a t i o n w h e r e t h e y w o u l d h a v e r u nthe i r ow n p lan t ( s ee gr aph in F igur e 3) . Consequent lyth is co- manuf ac tur ing agr eemen t a llow s the pa r tne rs tor each toge ther a low er cos t o f p r oduc t ion . The PSA -F ia t p lan t has been des igned to pr oduce 600 ca r s pe rday w i th a br eak- even poin t a t 350 . The agr eem entspecif ies a par i ty of production:300 MPV s should be d i r ec tedt o w a r d t h e P e u g e o t a n d C i tr o 6 nne tw or ks and 300 should besold in the Fiat and Lanciane tw or ks . The par tne r s evenm a n a g e t o d o u b l e t h epr oduc t ion capac i ty ( in the caseof a durable increas ing market) .In this case, they predict theypr oduc t ion cost s.

    example. The aim of the al l iance between Matra-A utomo bi les and Renaul t on the Espace MP V is main lyto poo l r esour ces of d if f er en t k inds - - the comp-lementa r i ty be tw een par tne r s occur s on qua l i t a t iveaspects.

    :The m d y compleme h Htyo f t h e P S A , - F i a t d e a l f s t h e

    on e b e tw ee n g:he finm c i lresm rces bro ght f:oge her

    b y p r ?tersw il l mee t low er

    Increasing bargaining pow erCo nce mi ng par ts supply, this co-operat io n increases thenegot ia t ion pow er of the a l l i e s vis-a-vis t h e c o m p o n e n tsuppliers . This point is highly relevant as 70 per cent ofthe va lue- added i s bought f r om outs ide .

    O n one hand , i f Mat r a - A utomobi les i s gener a l lyrecognised as exhibi t ing a creat ivi ty potential , i ts smalls ize in the car manufactur ingindus t r y induces tw o majorcompeti t ive disadvantages . F irs t ,the company has ne i the r anengine, nor a gear -box of i tsow n; i t a lw ays pur chased thesemechanical parts. Second, Matra-A utomobi les i s obvious ly no table to run a dis tr ibutionne tw or k of i t s ow n. These tw o shor tcomings a lw aysforced the company to es tablish l inks with larger carmanufacturers . On the other hand, i f Renault has thecomp lementa r y as se ts w hich Mat r a - A utomobi les l acks,the com pany had no MP V pr o jec t s imi la r to tha t o fM atra-Autom obiles at the t im e of the all iance. Despite afew ex ceptions (such as the A lpine an d R 30) , i t is a lsoweak in low-volume car manufactur ing exper t ise .

    Never theless , i t wil l be emphasised hereaf ter thatreaching this scale forced the two par tners to des igna mode l cons i s ten t w i th th e f our br ands and min imis ingindustr ial divers i ty. In addit ion, the res tr ic tedpr oduc t ion volumes a t tached to the pr oduc t ion ofniche vehicles (especial ly engines) constrain var ietybecause of cos t .

    Scale and Symbiot ic Effects do not go Hand inHand!Symbiot ic a l li ances gener a l ly occur b e tw ee n com panieswith dif ferent resource prof i les . The case of the co-oper a t ive agr eement l ink ing Mat r a - A utomobi les andRenault (G arret te and Blan c, 1990) ma y be ci ted as an

    MATRAA U T O M O B I L E S R E N A U L TS T A G E SOFVALUEADDED

    F i g u r e 4 W h e n C o m p l e m e n t a r i t y O c c u r s o nQ u a l i t a t iv e A s p e c t s . ( A d a p t e d f r o m D u s s a u g e a n dG a r e t t e , 1 9 9 1 , p . 1 5 )

    To put i t s imply, the two par tners dis tr ibuted tasksbe tw een them a t d i f f e r en t s tages of the va lue addedchain relat ive to their main s trengths ( see Figure 4) .Mat r a began w i th the des ign of the MPV and th en tookon m anufactur ing the bodies. I t s t i l l under takes to daymos t o f the as sembly w or k in i t s ow n p lan t . Renaul tsupplies M atra with m echanical par ts (engines an d gear -boxes) and is mainly in charge of the marketing,distr ibution and after-sales services. In designing thisal liance, the tw o comp anies pooled dif ferent kinds ofr esour ces in or der to over come the i r ow n w eaknessesand o bta in a com plemen ta r y mix o f qua l i ta t ivelydifferent resources.The PSA-Fiat a l l iance is not symbiotic , as the twocomp anies have com parable prof iles of resources and donot suffer from any real lack in one specific area: eachone has des ign competencies , development capabil i t ies ,assembly and man ufactur ing capacities, m arketing forcesand dis tr ibution networks . Their production systems arefair ly equal . From a Fordis t model , they both investedheav ily in autom ation befo re adop ting Japanese-inspiredtechniques today. Never theless , nei ther has par t icularexper ience in this niche as they are both relat ively we akin the upper s egments of the au tomobi le mar ke t . Theonly c om plem entar i ty of the PSA-Fiat deal is the on ebe tw e en the f inancial r esour ces br ought toge th er by thepartners.

    P r o b l e m s A r i s i n g a t t h eC o m m e r c i a l i s a t i o n S t a g eThe res t of the ar t ic le will explain w hy the cho ice of thetwo al l ies to dis tr ibute and se l l the vehicles in their ow n

    European ManagementJournalVo115No 1 February 1997 39

  • 8/8/2019 5 Fiat-PSA

    6/10

    CO-OPERATION IN A NICHE MARKET

    di s t r i bu t i on ne t w or ks ha s been an unavo i dab l e cho i ce . I twi l l then deal wi th the consequences of a sca le a l l i ance a tt he com m er c i a l i s a t ion s t age .

    O n e M P V , T w o G r o u p s , F ou r B r a nd sPSA an d F i a t chos e t o j o i n t he i r e f f o r ts on l y on a pa r t o ft he va l ue cha i n . They t i ed t he i r a ll iance t o t he d e s i gn andt h e m a n u f a c t u r i n g o f a n e n t i r e ly n e w M P V . T h i s m e a n st ha t t he t w o g r oup s r e t u r n t o com p e t i t i on a t thecom m er c i a l is a t i on s t age . The s am e M PV i s s o l d unde rf ou r d i f f e r en t nam es : Pe uge o t 806 , C i t ro6n E vas ion , F i atU l ys s e and Lanc i a Ze t a i n f ou r d i f f e r en t ne t w or ks . 7 I f li fea s a t w os om e i s no t e a s y , one can i m ag i ne t ha t l i f e a s af ou r s om e i s even m or e d i f f i cu l t !I n f ac t , t he t w o g r oups had no r ea l a l t e r na t i ve t o t h i scho i ce . I t w as obv i ous l y i nconce i vab l e t o m er ge t hed i s t r i bu t ion ne t w or ks o f t he t w o g r o ups ( as e ach g r o upw an t s t o keep i t s p r i vacy ) o r t o s e t up f rom scra tch a newne t w or k . The pa r t ne r s have no t been ab l e t o i n t eg r a t et he i r e f f o r t s a t t he com m er c i a l i s a t i on s t age m a i n l ybecaus e b r and n am es a r e cen t r a l i s sue s i n t he au t om ob i l em ar ke t . C a r b r ands a r e p r obab l y am ong t he m os t w e l lk n o w n b r a n d s a n d t h e m o s t r o o t e d a l l o v e r t h e w o r l d( t h i nk o f Mer cedes - B enz , f o r exam pl e ) . Each ca rm anuf ac t u r e r ho l ds a b r and equ i t y t ha t i t w an t s t op r e s e r ve and exp l o i t . C r ea t i ng a new pow er f u l b r andw o u l d r e q u i re h u g e i n v e s t m e n t s w i t h a n u n k n o w n r e t u r n( r em em ber t ha t t he r e j uvena t i on o f t he Ta l bo t t r ade -mark af ter PSA's t ake-over of Simca was a fa i lure) . As ac o n s e q u e n c e , i t w o u l d n o t h a v e b e e n w i s e t o t r y t ol aunch a new b r and .

    A s s u m i n g t h e C o n s t r a i n t s o f a S c a l e A l l i a n c eThe econom i c advan t ages o f a s ca l e a l l i ance a r ecoun t e r ba l anced by s t r ong cons t r a i n t s : t he cha l l engef o r PSA and F i a t ha s been t o c r ea t e s om e d i f f e r en t i a t i onam ong t he f ou r b r ands ( t o be pe r ce i ved by t he c li en t) bu ts i m u l t aneo us l y t o r educe t he i ndus t r i a l d ive r s i t y .

    t h e p e r i p h e rat h e re a l s o u r (differentiatioJ

    F i g u r e 5 D i s t i n g u i s h i n g B e t w e e n t h e T a n g i b l eP r o d u c t a n d a n E n l a r g e d V i e w o f th e O f f e r

    I n o r de r t o m i n i m i s e deve l opm en t cos t s , PSA and F i a tchos e t o de s i gn on l y one p r o j ec t ( know n a s U 60) w i t hf ew d i s t i ngu i s h i ng f ea t u r e s . Th i s de f i n i t i on m eans t ha tt he veh i c l e cou l d no t be f i t t ed t o t he i den t i t y o rpersonal i ty ( for example , in t e rms of s ty le) of any thef ou r b r ands . B y de f in i ng an ave r age concep t , none o f t heb r ands cou l d be en t i r e l y s a t i s f i ed . We cou l d evenques t i on t he ab i l i t y o f t he cus t om er t o a s s oc i a t e t he s eclones to o ne speci fic brand, i .e. to iden t i fy the brand.A t t he m anuf ac t u r i ng s t age , i n o r de r t o m ax i m i s eeconomies of sca le , a l l the MPVs share the same chass i s ,t he s am e f r am e , t he s am e body , t he s am e eng i nes ando t he r m echan i ca l pa r t s . PSA and F i a t ag r eed on on l ys m a l l d i f f e r en t ia t i on w i t h 90 pe r c en t o f t he com pone n t sb e i n g c o m m o n t o e v e r y M P V . V e h i c l e s o n l y s h o wdi f ferent l ight s , radia tor gr ids , bum pers an d upho ls tery .To be c lear , tha t means tha t one c l i ent wi l l f ind verys i m i l a r MPV s i n a Peugeo t , o r a C i t r o6n , o r even a F i a ts how r oo m ; t he Lanc ia Ze t a , pos i t i oned a t t he t op , i s t heonly one wi th more s igni f icant d i f ferences (e .g . i t s f rontgr id i s d i f ferent ) . The cent ra l point i s tha t in t roducingm or e d i f f e r en t i a t ion be t w e en m ode l s w o u l d have beent oo cos t l y acco r d i ng t o t he p r o j ec t m anage r s .To s um up , t he t ang i b l e f ea t u r e s o f t he veh i c l e do no tof fer s igni f icant d i f ferent ia t ion. Such a weakd i f f e r en ti a t i on am o ng t he f ou r b r ands i nduces a s t r ongs ubs t i t u t ab i l i t y be t w een t he m ode l s . Eve r yone know st ha t t he h i ghe r t he s ubs t i t u t ab i l i t y be t w een t w o o f f e r s ,t he h i ghe r t he p r obab i l i ty t ha t com p e t i t i on w ou l d s w i t chto pr ice wars . This i s probably the s t ronges t r i skat tach ed to th i s a ll iance. I t means tha t d i f fere nt ia t ion hast o be f ound e l s ew he r e . The com pan i e s cou l d no t r e l ys o l e l y on a c l ien t 's l oya l t y . A s s h ow n i n F i gu r e 5 , t heyhave t o r e l y on t he i r m a r ke t i ng s t r a t eg i e s t odi f ferent ia te .A f i r s t e lement wi l l be the dens i ty of the i r d i s t r ibut ionnetwork, the i r de l ivery t ime and the qual i ty of the sa les -forces . The larger the number of point s of sa les , theh i ghe r t he p r obab i l i t y f o r a b r and t o r each cons um er s .D i f f e r en t i a ti on cou l d a ls o be f ound t h r oug h t he i m agea n d r e p u t a t i o n c r e a t e d t h r o u g h c o m m u n i c a t i o n a n dadver t i s ing. Final ly , another way to a t t rac t c l i ent s i s thequal i ty of a f ter sa les services . As a l l these per iphera lf e a t u r e s b e c o m e m o r e a n d m o r e i m p o r t a n t w h e n t h eMPV r eaches i t s m a t u r i t y phas e , PSA and F i a t m ay f i ndhere an of f se t to the r i sk of pr ice wars .

    A n I n t e r e s t i n g A p p r o a c h t o P r e c l u d eO p p o r t u n i s ti c B e h a v i o u rThe bene f i ts t ha t on e f i r m ga i ns i n an a l l iance depend oni t s own ac t ions , but a l so , on the ac t ions of i t s par tner . I fone a l ly does n ot e f fe c t ive ly co-opera te , t rus t wi l l bej eopa r d i s ed and t he co - ope r a t i on w i l l p r obab l y cea s esooner or l a ter . Hi l l (1990) , Gugler (1991) , Koenig andVan Wi jk (1992) or Gula t i et a l . , ( I 99 4 ) - - r e l y in g o ngam e t heo r y - - s t r e ss ed t ha t one cen t r al p r ob l em i na l l i ance m anagem en t i s f i nd i ng w ays t o r educe t he

    40 European Management JournalVo115 N o 1 F e b r u a r y 1 9 9 7

  • 8/8/2019 5 Fiat-PSA

    7/10

    CO-OPERATION IN A NICHE MARKET

    probab i l i ty o f oppor tun i s t i c behav iou r . T ha t i s whyal l iances are frequent ly cons idered as uns table and r iskyforms of organisa t ion. We wil l see in the PSA-Fia t casethat the s t ruc turing of the ir a l l iance a l lows the twopartners to increase the ir in ter-dependency and,consequent ly , to re inforce the deal .The PSA-Fia t a l l iance on MPV vehic les is not the solesignificant link between the two groups. Since 1978,they have been a s s oc ia t ed in the p roduc t ion o f l i gh ttrucks. These vehicles arep roduced in I t a ly (abou t190 000 un i ts pe r yea r ) by Seve lSud, a company tha t is equal lycon t ro l l ed by the two g roups .T hey a re commerc ia l i s ed byPeug eot , Ci t ro6n and F ia t , underthe names Boxer , Jumper,Ducato , respect ive ly . The threemo dels are v ery s l ight ly differentia ted, as far as externalappearance is cons idered, but they are equipped withengines of their own. Yet, the alliance is profitable forthe two partners as i t a l lows them to reap benefi ts f romscale effec ts (exact ly as in the case of MPVs).

    The .PSA. Fiatvas ded, ,ned ltow

    p,r-t ,ers to h, ,arr J i ' m

    What is important to emphas ise , however, i s tha t thedeve lopmen t , ope ra t ion and managemen t o f the Seve lSud plant a re under the respo ns ibi l i ty of Fia t s ince thecrea t ion of the fac tory . PSA exerts control on the boardand throu gh a smal l num ber of managers tha t representthe gro up on th e industrial s ite in Italy. But, as PSA isno t invo lv ed in the day - to -day m anagemen t o f the p lan t,it relies totally on Fiat for those aspects. Thisorganisa t ion obvious ly crea ted an imbalance as PSAwas heav i ly dependen t on the ac t ions o f F ia t .T he ag reemen t on M PVs a l lowed the two compan ie s tosolve th is problem by f inding a new equi l ibr ium for theba lance o f power be tween them, by s ha r ing the poweron t wo f ie lds and n ot jus t on o ne . The point is i l lust ra tedby F igu re 6 . T hey c rea ted a new company , Seve l Nord ,with equal ownership , which is in charge of thep roduc t ion o f M PVs . T h i s company and i t s p l an t a relocated in France . As previous ly ment ioned, i t simp lemen ta t ion and i t s managemen t have beende lega ted to peop le o r ig ina t ing f rom the PSA g roup .

    before the MPV a l l i a n c e ] J af te r the M PV a l l i a n c e

    0 . 5 0

    IsLI0 . 5 0 0 . 5 0 r

    _ ,

    S E V E L S E V E L 1S U D N O R D /equity l i n k s ~ m a n a g e m e n t r e s p o n s i b i l i t y

    F i g u r e 6 C o u n t e r b a l a n c i n g R e l a t i o n s h i p s B e t w e e nP S A a n d F i a t

    The se new links create an interesting situation. The tw opartners are involved in two different ventures .Important decis ions are taken jo int ly but they delegatemanagement respons ibi l i ty to the local partner for eachof these ventures . By the way, th is form of organisa t ioncrea tes a mutual dependence . The fac t tha t PSA has torely entirely on Fiat for its supply of light trucks iscounterbalanced by the fac t tha t Fia t has to re ly ent i re lyon PSA for i ts supply of MPVs. I t can be eas i lyunde rs tood tha t ne ithe r pa rtne r ha s any room to b ehaveopportunis t ica l ly as i t ma y sufferr e p r i s a l s from i ts counterpart .

    Yet, a serious limit of thisorganisational form is thatdedica t ing the management ofthe alliance to one partnernotably prevents the partnersfrom learning from each other.

    Few Learning OpportunitiesResource transfer alliances, where allies aim to learn fromtheir partners , have b een especia l ly examined by K ogu t(1988), Hamel e t a l . (1989), Hamel (1991) and Richter andVe ttel (1995). In a resourc e transfer alliance, the partnersuse the day-to-day exchanges ins ide the a l l iancestructure between, for example, engineers, humanresource managers and market ing people of the a l l iedcom panies to acquire tacit (i .e. non formal) kno wle dge.A wel l -known case is Nummi, the equi ty jo int-venturebe tween Gene ra l M oto rs (GM ) and T oyo ta ( s eeAppend ix ) . T he ob jec t ive o f GM and T oyo ta , t h roughtheir equi ty jo int venture Nummi, has been to use thestructure as a means of reciprocal learning. At thebeginning of the 1980s , US car manufacturers sufferedf rom ma jo r p rob lems (Womack e r a I . , 1990). Comparedto their Japanese counterparts , US plants were far lessproduct ive ; they o bvio us ly needed to f il l the gap quicklyto survive . To reach th is objec t ive , GM decided toreopen its California plant at Fremont (closed a few yearsearl ie r due to poor ra t ings) and to entrus t Toyota withthe respons ibi l i ty of i t s management . I f i t has been anopportuni ty for GM to see and learn about Japanesepractices, it was also, on the other side, an opportunityfor Toyota to learn about the North American carmanufacturing environment -- tha t he lped i t to fur theropen two new fac tories of i t s own (Rehder , 1988).The PSA-Fia t a l l iance was not des igned to a l low thepartners to learn from each other . Very few o pportuni t iesof learning from the partner exist in the alliance. Eventho ugh decision-making is shared am ong the allies for allmajor is sues -- especia lly the defini tion of the projec t ,Fia t entrus ted PSA with mos t of i t s implementa t ion: i tmeans tha t des ign s tudies , development and tes t ing ofthe new vehicle , se t -up and mana geme nt o f the new plantare (or have been) under the respons ibi l i ty of PSA. On lya smal l number of people from the two companiesworked together . Fia t representa t ives have been part of

    European M anagementJournalVoJ15 No 1 Feb rua ry 1997 41

  • 8/8/2019 5 Fiat-PSA

    8/10

    C O -O PER A TIO N IN A N IC H E M A R K ET

    t h e j o i n t t a s k f o r c e s d u r i n g t h e d e s i g n p r o c e s s a n d al i m i te d n u m b e r o f m a n a g e r s a r e s ti ll i n v o l v e d i n r u n n i n gp r o d u c t i o n . A s a c o n s e q u e n c e , F i a t b e n e f i t s f r o m t h ee x p e r i e n c e o f P S A , b u t d o e s n o t l e a r n f r o m i t sc o u n t e r p a r t . A s c o m p e t e n c e e x c h a n g e s a r e l o w , t h e r i s ko f k n o w l e d g e l e a k in g i s s li g h t. B u t t h a t m e a n s a l so t h a tt h e c o - o p e r a t i o n i s n o t f u l l y e x p l o i t e d .O n e e x p l a n a t i o n o f t h i s f e a t u r e i s t h a t g a p s b e t w e e nm o s t o f t h e E u r o p e a n c a r m a n u f a c t u r e r s a r e n o t a s d e e pa s t h o s e t h a t e x i s t e d b e t w e e n J a p a n e s e a n d N o r t hA m e r i c a n c a r m a n u f a c t u r e r s a t t h e b e g i n n i n g o f t h e1980s . I f l e a rn ing a l l i ances have been appropr i a t e i n t heN o r t h A m e r i c a n c o n t e x t a n d h a v e b e e n r e l e v a n t f o r aE u r o p e a n c o m p a n y l i k e R o v e r ( w i t h i n i t s f o r m e ra g r e e m e n t w i t h H o n d a ) , t h e y s e e m l e s s r e l e v a n tb e t w e e n E u r o p e a n c a r m a n u f a c t u r e r s .N eve r the l e s s , f o r t he f i r s t t im e , PSA and F i a t w i l l be ab l et o c o m p a r e t h e e f f i c ie n c y o f t h e i r r e s p e c t i v e c o m m e r c i a ln e t w o r k s a s t h e y o f f e r e x t r e m e l y s i m il a r c a rs . H o w e v e r ,i t i s p r o b a b l y m o r e a c o i n c i d e n c e t h a n a n c o n s c i o u ss t r a t e g y .

    C o n c l u s i o nD e s p i t e a l a t e e n t r y i n t o t h e M P V m a r k e t , P S A a n d F i a ta r e now se r ious p l aye r s i n t h i s f i e ld . Seve l N ord hasr e a c h e d p r o d u c t i o n o f 4 5 0 M P V s ( a n d u ti l i ty c l o ne s ) p e rd a y . T h e f o u r b r a n d s t o g e t h e r r a n k e d f i r s t i n t h e 1 9 9 5E u r o p e a n m a r k e t . B u t , t h e r e a r e a l s o n o w n o f e w e r t h a nf i v e d i f f e r e n t c o m p e t i t i v e p l a n t s d e d i c a t e d t o t h ep r o d u c t i o n o f M P V s i n E u r o p e . A n d u n f o r t u n a t e l y , i ts e e m s t h a t t h o s e p r o d u c t i o n c a p a c i t ie s h a v e i n c r e a s e d a ta h i g h e r r a t e t h a n d e m a n d i t s e l f .Th i s a r t i c l e show s the pow er o f s ca l e a l l i ances i n a n i che

    m a r k e t . T h e t w o g r o u p s h a v e b e e n a b l e t o r e a c h r e s u l t st o g e t h e r t h a t t h e y p r o b a b l y w o u l d n o t h a v e b e e n a b l e toreac h a lone. A c lass ical d i f f icul ty associa ted wi t h a l l iancem a n a g e m e n t , i . e . o p p o r t u n i s t i c b e h a v i o u r , h a s f o u n d ag o o d s o l u t i o n h e r e . N e v e r t h e l e s s , t h e w e a kd i f f e re n t i a ti o n b e t w e e n t h e p r o d u c t s o f t h e a l li a nc erem a ins a d i f f i cu l t y t o be r e so lved . The p robab i l i t y o fpr ice wars i s s t i l l h igh.

    A p p e n d i x - - N u m m i : F ro m A s h e s toS u c c e s sNew United Mo tors Manufacturing Co . , Inc . (Nummi) hasprobably been the most pub ticised joint venture created betweenDetroit's Big Three a nd Japan ese auto makers. This alliance of thelargest US automob ile manu facturer and the largest in Japanoffers an exam ple of organisations trying to learn from each other(see Figure 7). The two corporations established the venture in anattempt to apply Japanese-style management to automobilemanufacturing in the US.The N um mi plant is a former Gene ral Motors (GM ) assemblyplant; it was previously owned and managed by GM. Ope ned inI96 2 as a state-of-the-art facility in Frem ont (California), the p lantproduced Chevrolet Malibu and Century and GMC trucks alongtraditional Taylorist lines. Ov er the yea rs, the plant m et serioustroubles. In the context of a US automobile industry crisis,employment went f rom 6,800 in 1978 to 3 ,000 in 1982. Theorganisation was tied into adversarial and unproductive labourrelationships, hampered by end less conflicts, with us-themdivisions between w orkers and m anagement. As a result , thisplant exhibited the worst figures in the GM group. Adler (I993)reports: 'GM -Fremont had low productivity, aby sma l quality,drug and alcohol abuse and absenteeism over 20%'. The plant wasfinally closed in March I982.The intention of To yota and G M to collaborate was announcedin Feb ruary I983. G ene ral Motors provided the facili ty andToyota contributed $I00 million in capital. The two partnersagreed to shar e tasks : Toyota would take on car des ign,

    ~ : ! i !

    i z i l i ~

    t o g e t a f o o t h o l d i n t h e U S a u t o m a r k e ti n o r d e r t o t e s t t h e a p p l i c a b i l i t y o f i tsm a n a g e m e n t t e c h n i q u e s , t o l e ar n h o wt o m a r k e t / s e l l c a r s o n t h e U S m a r k e tt o l e a r n a b o u t t h e A m e r i c a n s o c i a l ,p o l i t i c a l , l e g a l e n v i r o n m e n tt o u n d e r s t a n d t h e a u t o m o t i v e s u p p l ie rn e t w o r k s l o c a te d i n t h e U S a n d t oe s t a b l i s h r e l a t i o n s h i p s w i t h A m e r i c a ni n d u s t r y s u p p l i e r st o p l a c a t e A m e r i c a n p r o t e c t i o n i s t s

    N u mm i \ ~ T O ~ , /t o l e a r n a b o u t T o y o t a p r o c e s s e s o fp r o d u c t i o n a n d i t s u s e o f h u m a nr e s o u r c e s

    ~:~ to l earn a bou t i t s m an ag em en tt e c h n i q u e s , s t y l e s a n d p h i l o s o p h ya n d h o w i t i n t e g r a t e s t h o s ea p p r o a c h e s i n a c o n g r u e n t a n du n i f i e d f r a m et o b e a b l e t o o f f e r a s m a l l c a r i nt h e s u b c o m p a c t r a n g e

    F i g u r e 7 L e a r n i n g F r o m th e P a r t n e r42 European Management JournalVo115 No 1February 997

  • 8/8/2019 5 Fiat-PSA

    9/10

    C O - O P E R A T I O N I N A N I C H E M A R K E T

    engineering , and daily operat ions and G M w ould be responsib lefor marketing and sa les .Nu mmi s ta r ted wi th an en t i r e ly n ew man ag emen t t e am wi th adifferent manageria l philosophy. Toyota assumed dominance inthe jo in t venture a nd t ook fu ll responsibil ity for teaching theAmericans how to implement and manage i ts production system:Ta tsu ro To y o d a , th e so n o f To y o ta ' s fou n d er , was ap p o in ted a sth e CEO; h e came wi th a g ro u p o f ab o u t 3 0 To y o ta man ag e rsand produ ction co-ordinators . He a lso recruited managers fromFord, Chrysler and o ther GM plants (about 20 managers camef ro m GM).Th e tw o b u i ldin g b lo cks o f th e To y o ta ap p ro ach to p ro d u c t io nan d o p e ra t io n s man ag emen t a re th e t e am co n cep t an dstandardisa t ion of work . In the lean production m odel adopte dby the f ir m , leaming is based on specia l ised wo rk taskssupplemented by job ro ta t ion and d isc ip line in theimplementation of detailed wo rk procedures. This approach isopposite to Volvo 's Uddevalla p lant in Sweden that exemplif iedthe hum an-centred a l ternative arguing that organisat ionaladaptabili ty and learning are best served by lo nger wor k cyclesand a re turn to craf t work forms.Manageria l techniques co ver human resources m anagem ent f la thierarchies, compression, em power m en t of people , team problemsolving, consensus seeking, and production l ine organisat ion(constant improvement [Kaizen], continuous-f low manufacturing[ ' jus t in t ime ' del ivery of automotive parts and components]) .After a two -year c losure , T oyo ta re-configured the assemblyplant and constructed an adjacent s tamping p lant . In December1 9 84 , a n ew o rg an isa tio n d es ig n ed a ro u n d th e To y o ta p ro d u c t io nsystem star ted . From May 1984 to December I985, Nummi hired2 ,200 workers , jo in t ly re-h ired by Toyota and the United AutoWo rkers (UA W) throu gh a careful job-applicat ion screeningprocess (85 per cent came from the previous la id-off work-force- - including the entire union h ierarchy). In re turn , UA W agreedto accep t th e To y o ta p ro d u c t io n sy s tem an d to s imp li fy th e jo bclassification (from 18 skill classes to 2).In 1 9 9 3 , To y o ta an d GM an n o u n ced th a t th ey reach ed anagreem ent to continue their Japanese/American jo in t venture inits current form indefinitely. As Nummi was celebrating its 10thanniversary , i t achieved another major milestone when i tproduced i ts two-mill ionth vehic le (a 1994 Toyota Corollased an ) o n Au g u s t I2 , I9 9 4 .Nummi exhibits s ignif icantly h igher productiv i ty , quali ty andprofi tabil i ty compared to the o ld GM-Fremont p lant . I t producesthe same num ber of cars , but w ith mu ch higher quality and halfthe work-force . Nummi has earned recognit ion as a world-c lassmanufacturing enterprise: the quali ty of Numm i products r ivalsthat of i ts s is ter p lant in Takaoda City in Japan or even the bestJapanese cars (Womack et al . , 1 9 9 0 ) . Ev en th o u g h Nu mm i h aso f ten b een a mo d e l o f l ab o u r -man ag emen t co -o p e ra t io n an dharm ony , the plant is nevertheless no t free from dispute (e.g. thep lan t a lmo s t w en t o n s t r ik e in No v e mb e r 1 9 9 4 ) . Nu mm i ' sturnaround s tems from the creation of a third culture that w asneither American nor Japanese . According to Wilms et al. (1994),the hybrid , b y com bining the best of both parents, enabled thetwo companies to break aw ay from the o ld conflic t-r idden cultureand start anew.Lessons learned a t Fremont a l lowed Toyota to se t up , four yearsla ter , two new auto production p lants , one in the United Sta tes(Georg etown , Kentucky) and one in Canada. Those p lants achievequality levels close to their Japanese-manufactured counterparts.Quoting the Federal Trade Commission, Wilms et al. ( I9 9 4 )indicate that Nummi was help ing GM to reap the benefi ts ofgaining first-hand experience with an efficient production system.Nevertheless , whe ther G M actually has in tegrated the capabil i tyof manufacturing small cars is quest ioned to day .

    N o t e sI A previous version of this text was presented at theMontreal 1996 Annual Conference of the Adminis tra t iveSciences Associa t ion of Canada (ASAC) in the PolicyDivision. I thank the three anonymous reviewers of theconference and my colleagues Jean-Jacques Chanaron andKlas Soderquis t for helpful comm ents in reviewing the text.2 The author thanks the fo l lowing people who generouslygave their time in replying to his questions: Franca Donini,Communication Manager, Fi a t Franc e; Roland Du mont,Information Manager, A utomobiles Peugeot; Jacques Farenc,Chief Editor of the Journal de l 'Automobile; Ro ger Gamier,Sevel Nord Plant Manager, Vice-President o f Sevel NordSA; Jos4 Mailhe, Information Manager, A utom obile sPeugeot; Daniel Michon, Spare Parts Logistic Manager,Autom obiles Peugeot; Gil les Naud y, Journalis t a t L 'Auto-Journal; Patrice Ramage, Plant Manager, AutomobilesPeugeot.3 Such as the Pontiac Trans Sport and Chevrole t Lumina(GM), Ford Win& tar , M ercury Vil lager (Ford) and NissanQuest , Mazda M.P.V. , Toyota Previa , e tc .4 W ith a cumulative volume of production exceeding 5mill ions units , a production c lose to 585000 in 1994,Chrysler is the world 's largest manufacturer of mini-vans.5 A sm all part of the production (about I0 p er cent) isassembled by Alpine, a subsidiary of Renault.6 Matra-Automobiles produces about 300 MP Vs per daywhereas Fia t produces about 1600 Tipos per day.7 Alfa-Romeo, another brand of the Fia t Group, has beenexcluded from the project because of i ts s trong sportscharacter -- not su ited to MPV.

    R e f e r e n c e sAdler, L. (1979) La strat6gie de la symbiose. Harvard L 'Expansion1 4 , Au to mn e , 8 5 -9 8 .Adler, P.S. (I993 ) Time-and-motion regained. Harvard Bus iness

    Review January-February, 97-108.Brown, C. and Reich , M. (1989) When does union-managementco o p e ra t io n wo rk ? A lo o k a t NUMMI an d GM-Van Nu y s .California Managem ent Review 31, 4, Summer. 26--44.Dussauge, P. and Garrette, B. (1990) Alliances strat4giques moded'emploi. Revue Fran~aise de Ge s tion 8 5 , Sep temb re -Oc to b re , 4 -1 8 .Garrette B. and B lanc, G. (199 0) M atra / R enault Espa ce, CaseStudy. Groupe H.E .C. Paris.Gugler, P. (1991) Les Alliances Strat~giques Transnationales. 15ditionsUniversitaires Fribourg (Suisse).Gulati, R., Khanna, T. and Nohria, N. (1994) Unilateralcomm itments and the importance of process in alliances.Sloan Management Review 35, 3 , Spring , 61-70.Hamel, G ., Doz, Y.L. and Prahalad, C.K. (1989) S'associer ave c laconcurrence: comment en sort ir gagnant? Harvard-L'Expansion 5 4 , Au to mn e , 2 4 -3 2 .Hamel, G. (1991) Competi t ion for competence and in ter-partnerlearning within international strategic alliances. StrategicManagement Journal 1 2 , 8 3 -1 0 3 .Henault, P. (1996) Les accords de coop6ration dans l 'industrieautomobile : Le cas du groupe PSA P eugeot Citroen. RevueAfplane 1 5 , Mars , 3 7 -4 I .Hennart, J.-F. (1988) A transaction costs the ory o f equity jointventures. Strategic Managem ent Journal 9 , 3 6 1 - 3 7 4 .Hill, C.W .L. (199 0) Cooperation, opportunism, and the invisiblehand: implications for transaction cost theory. A cadem y o fManagement Review 15, 3, 500--513.Joffre, P. and Koenig, G. ( 198 4) Strat6gies de coop 4ratio n etd'alliance inter-entreprises. Enseignement et ge s t ion 31 ,Au to mn e , 6 7 -7 3 .Koenig, C . and Van Wijk, G. (1992 ) Alliances interentreprises: ler61e de la confiance. In Perpectivesen Management Strat~gique,ed. A. No61, pp. 30 5-32 7. E conomica, Paris.

    European Management Journ a l Vo115 No 1 February 1997 43

  • 8/8/2019 5 Fiat-PSA

    10/10

    C O - O P E R A T I O N I N A N IC H E M A R K E T

    Kogut , B. (1988) Joint ventures: theoret ical and empir icalperspectives. Strategic Man agement Journal 9 , 319- 332 .Rehder , R.R. (1988) Japanese t ransplants: a new m ode l for Detro i t .Business Ho rizons Januar y - Febr uar y , 52-61.Richter , F .-J. and Vet tel , K. ( I995 ) Successful joint ve ntures inJapan: t r ansf e r r ing knowledge th r ough o r gan iza t iona lt eaming . Long Rang e Planning 2 8 , 3 , 37 - 45 .Rober ts, E .B . and Mizo uchi , R. (1989) Inter- f irm technolo gicalcol laborat ion: the case of Japanese biotec hno logy .International Journal of Technology M anag eme nt 4 , I , 43 - 61 .Wilms, W.W . , Hardcast le , A .J. and Zel l , D.M. ( I994) C ul turalt r an s f o rm a t i o n a t N U M M I . Sloan Managem ent Review 36, 1 ,F a ll , 9 9 - I I 3 .Wom ack, J .P . , Jones, D.T. and Roos, D . (1990) The Machine ThatChanged the W orld, Rawson Assoc ia t es , New Yor k .

    D O M I N I Q U E J O L L Y ,Groupe ESC Grenob le ,12, rue Pierre Skmard,B.P. I27, 38003,Grenoble , Cedex 03,France.Professor Dom inique Jol lyis Head of Research atGroupe ESC Grenob le ,and teaches strategicmanagement . He is alsoEditor of C a h i e r s d u

    M a n a g e m e n t T e c h n o l o g i q u e . His recent researchhas focused on the concept and implementat ion ofinter- f irm al l iances. Currently , he is working on l inksbetween s trategy and technology. Much of his recentpublished research is in the f ie ld of the socialdimensions of s trategic managem ent . H e haspublished in R e v u e F r a n q a i s e d e G e s t i o n , G e s t i o n2 0 0 0 , D i r e c t i o n e t G e s t i o n d e s E n t r e p r i s e s andL ' E x pa n s io n M a n a g e m e n t R e v i e w .

    4 4 European Managem ent JournalVo115 N o 1 F e b r u a r y 1 9 9 7