Want to be kind to the planet and your portfolio at the same time? The Fool shows you how in our special series on Earth-friendly investing.
Ever since Kirk Kerkorian's abortive attempt to play matchmaker for GM
Might GM bid for DaimlerChrysler's
Would this Fool's conspiracy theory bear fruit, with Toyota
Conspiracy theories need pruning
Else they tend to sprout shoots. Undeterred by the failure of my last merger theory to pan out, I've been musing lately about how a handful of notable trends might combine to form a thesis for one of the above mergers. Specifically:
- As fellow Fool Rich Duprey observed back in October, in the wake of the GM-Nissan-Renault debacle, the CEO of two-thirds of this equation was said to be mulling a possible combination with Ford instead.
- Nissan's long-awaited response to Toyota's family of gas-electric hybrid cars, the Altima hybrid, is finally ready for prime time.
- Although it made progress in the hybrid wars by fielding the first hybrid SUV, Ford remains at best a bit player in this automotive niche. Whereas Toyota, for example, took less than six months to run through its quota of tax-subsidized U.S. hybrid sales, Ford won't even see the ceiling on its own quota until next year at the earliest.
- Part of the reason for this, if Ford is to be believed, is through no fault of Ford's own. Back in September 2005, I wrote of then-COO Jim Padilla's lament that the company was having trouble securing the necessary parts to even build hybrid vehicles, let alone worrying about how to sell them. Apparently, the two major suppliers of hybrid vehicle batteries -- Japan's Sanyo and Matsushita Electric
(NYSE:MC)-- were favoring Japanese automakers in their supply contracts. Unable to secure a reliable supply of hybrid vehicle batteries in quantity, Ford's effort to enter this niche in scale was hobbled from the get-go.
Take a look at the clock, Ford. By my watch, it's about quarter-till-time to put up or shut up. That's if getting access to hybrid batteries is your beef, and if you're truly committed to making significant inroads into a market that Honda
Earlier this week, the apple of Ford's eye, Nissan, announced a joint venture to produce lithium-ion batteries in cooperation with fellow Japanese industrial powerhouses NEC and its NEC Tokin subsidiary.
Currently, all commercial hybrids on the market use old nickel metal hydride (NiMH) battery technology. But to achieve the kinds of advances that everyone from GM to former CIA Director James Woolsey has been talking about, most experts agree that more powerful lithium-ion batteries will be needed. Although talking about development-stage commercial technology is fraught with peril, the word on the street is that lithium-ion batteries will provide twice the power of their NiMH brethren, while taking up half the space. Apparently agreeing with this view, Nissan and the NEC twins aim to begin commercial production of lithium-ion batteries by 2009.
Now, you might not ordinarily think of Nissan as a leader in this field -- and it isn't, given that while Honda and Toyota have developed hybrid vehicles independently, Nissan took the shortcut of licensing its hybrid tech from Toyota (as has Ford). That said, Nissan has been conducting independent research into lithium-ion batteries since 1992. Its new joint venture aims to accomplish two tasks:
- First, provide the battery technology needed to power Nissan's own first internally-developed hybrid engine, due out in 2010.
- Second, dominate the market for this new breed of rechargable auto battery. Naturally, "dominating" a market requires that there be a market to dominate. So once its research is proven and its batteries ready for the market, Nissan/NEC won't be keeping them to itself -- but will sell them to all comers, Ford included.
Quit yer whinin'
But from where I sit, Ford shouldn't just sit on its bucket seat and wait in line to shop at Nissan's new store. When GM CEO Rick Wagoner killed the Nissan merger that Kerkorian was pitching, Wagoner's central reason for bailing was that the deal looked too sweet for Nissan. Simply put, GM didn't think that Carlos Ghosn brought much to the table, and that Nissan would benefit from a tie-up much more than GM would.
Well, listen up Messrs. Wagoner and (especially) Ford: This week's announcement demonstrates that, in addition to whatever else Nissan has to offer, it's got the edge in a leading-edge hybrid technology -- one that appears destined to replace Toyota's current NiMH-based tech. From where I sit, that's a pretty good reason to sit down at the table and start talking partnership with Nissan.
Even if the news doesn't amount to a compelling thesis for a merger, it offers a solution to Ford's complaint about being locked out of the market for hybrid batteries. That alone should spark some discussion.
Juice your own knowledge of the burgeoning hybrid vehicle industry with:
Fool contributor Rich Smith has no position in any of the companies mentioned in this article (if he did, The Motley Fool would require him to tell you so), nor is he a card-carrying member of the Green Party. On the contrary, he drives a gas-guzzling Chevy pickup -- but boasts that since it's a stick shift, it gets better gas mileage than an automatic. (To which the audience replies: "Not the way you drive, it doesn't.")