Fiat and Mitsubishi

AS the automotive industry consolidates frantically, there are rumors of a link being planned between Fiat - the parent company of Ferrari - and Mitsubishi Motors in Japan. Both companies are considered to be too small to survive by themselves but have yet to be swallowed up by industry giants General Motors, Ford, Toyota, Nissan-Renault, Volkswagen and Daimler-Chrysler.

Fiat - the parent company of Ferrari - has a variety of joint ventures with Renault, but the two companies cannot easily merge as there would have to be too many layoffs and factory closures for a deal to be politically-acceptable.

Mitsubishi is Japan's fourth largest car manufacturer after Toyota, Nissan and Honda. It is heavily dependent on the Japanese market although it does operate in 30 countries around the world. It is a member of the loose consortium of Mitsubishi companies, although these are independent of one another. It employs 27,000 people and had sales last year of $28bn. If the two companies were to go into partnership the result would be a company slightly smaller than Nissan-Renault but larger than DaimlerChrysler.

If such a merger did happen it would leave Honda, Peugeot and BMW as the likely targets for takeovers. It would also mean that DaimlerChrysler's hopes of finding an Asian partner in its global alliance would be severely weakened.

According to the stories from Japan the Fiat-Mitsubishi talks are centered on engineering alliances rather than a merger. Mitsubishi has a groundbreaking direct injection gasoline engine which it sells to other manufacturers. To date there are deals with Peugeot and with Volvo. It also has an advanced automatic gearbox in which Fiat is believed to be interested.

Mitsubishi is trying to improve its image and has enjoyed considerable success in rally raids with its Pajero model and in the World Rally Championship with the Lancer, with which Tommi Makinen has won the last three World Rally Driver titles. In 1990 it funded the construction of a V12 Formula 1 engine. This was built by Hiroyuki Hasagawa's HKS company and was tested in the back of a Lola Formula 3000 car in 1992 by Kazuo Mogi.

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