Who’s driving whom?
In the early 1900’s, there were over 2000 manufacturers making cars, over 1500 of these in the USA alone. Now, there are only 39 brands of vehicle which you can buy. Of these, 30 of them are controlled by just nine players. Six companies maintain some form of independence: Honda, Hyundai-Kia, Rover-MG, Proton-Lotus, Porsche and Morgan. Honda and Hyundai sell millions of units, the others are responsible for a comparative handful of sales. Therefore, we have just 12 companies who are responsible for the look and feel of the entire world automotive industry. No wonder my car looks the same as 100 others!
The great American Ford empire now controls the European Volvo and British Jaguar; General Motors Holden has links with Fiat, Subaru and Saab; Fiat in turn, controls Ferrari, Lancia and Maserati; Mercedes & (Daimler)Chrysler now own Mitsubishi; The ‘old commoner’ Volkswagon now controls the more prestigious Audi, Bentley and Lamborghini; BMW owns the almost opposite ends of the spectrum, Mini and Rolls Royce. Toyota has invested heavily into Daihatsu; Nissan has merged with Renault.
In the next few years, it is expected that further mergers and buyouts will occur, leaving perhaps five or six mega-corporations to decide what the world will drive. If you think that it is confusing now that we can buy Lexus, Lexcens and Nexus, or drive Barinas, Berlinas and Berninas… If you already think that it is getting hard to tell whether a car is a Falcon, a Commodore or a Toyota… just wait, things may get even more uniform…
In a few years, it may be possible to have everyone in your family driving a car with a different badge on it, (for example, Jaguar, GM, VW, Mercedes, Subaru and Mini) and yet find that the cash you pay out all goes to the one ultimate recipient company. (See Invest News #33 “Who’s Taking Your Money”, issued December 2004 for even more jaw-dropping revelations. Online at [http://www.invest.org.au/news] or ask me for a paper or email copy.)
Who drives the cars that drive us?
In the early days of motoring in the US, the Rockefellers controlled the Standard Oil trust. A few other companies, including Texaco and Gulf, were backed by the Mellons, Morgans and Vanderbilts. European capitalists rushed to develop their own oil industry, out of which came Royal Dutch, Shell, British Petroleum (BP), and the Petroleum Company of France (CFP), which eventually became Total.
Dozens of oil companies battled it out for most of the century; one by one they were defeated or absorbed by larger ones. The five super majors which today dominate the oil industry are the result of mergers that swept the oil industry starting just a few years ago.
In 1998, 12 already enormous oil companies combined to form five. Exxon (who owned Esso, Rockefeller’s “SO” or “Standard Oil”) merged with Mobil; then Chevron, which had already bought up Gulf and Caltex, merged with Texaco; Shell & Royal Dutch combined, BP bought out Amoco, Marathon and Arc; Total merged with Elf and Fina.
Watch the five, focus on one or two
Even if you only own shares in Telstra, it makes sense to keep an eye on what Optus, Vodafone or Virgin are doing. Are their deals better? Are their profits higher? Will their new marketing campaign mean that Telstra sales will suffer? Will bad publicity about the National Bank make my Commonwealth stocks worth more? Think about it. Now, back to oils and cars…
Exxon/Mobil Exxon is the largest company of any kind in the world as measured by sales, which totalled US$242 billion in 2003. That is more than the budget revenue of 185 nations, including Brazil, Canada, Spain, Sweden and the Netherlands. In 2003, the five biggest oil companies operating in the U.S. (ExxonMobil, Chevron-Texaco, ConocoPhillips, BP and Royal Dutch/Shell) made US$53 billion in net profits. Almost half of this profit was made by Exxon alone. Last year, Exxon produced US$21.5 billion in profits.
The five biggest auto companies in the world (GM, Chrysler, Ford, Toyota and Volkswagen) produced only US$15 billion in profits – combined. Twenty one billion… hmmm, that’s a lot of money… That’s a lot of profit. How do they spend it all? Feeding the world? Saving the whales? Or diversifying into other areas to make yet more profits?
Exxon has been granted over 10 000 US patents for new inventions in the last ten years alone. They also own the chain of “On The Run” convenience stores, and ‘smart-card’ technology based “Speedpass”, a system which enables you to pay for food and fuel by waving your key-ring in front of a service station scanner. You can actually fill your belly, fill your tank and pay for the purchases, with one company making money on all three transactions.
The word of the day will now have to be “ubiquitous”, as in “seeming to be everywhere”. Just think of Volkswagon beetles in the 60’s or McDonald’s restaurants in the 80’s, or the prefix “www” in the “noughties”. Now go to http://www.dictionary.com to hear an American accented robot pronounce the word “ubiquitous”… ☺
Every four seconds, one plane and 1200 cars are refueled by a Shell oil company. Shell also “goes green”, running hydrogen-powered cars, vans and buses in the USA, Europe and Asia. But the ubiquitous company doesn’t just make fuel, oh no…
Shell also makes the chemicals used in plastic bags, detergents, lubricants, clothing, packaging, paints, adhesives, unbreakable windows, plywood, computer casings, compact discs, foams for furniture and bedding, coatings for floors and furniture, artificial sports tracks, ski suits and waterproof leisure wear, medicines, dyes, antifreeze, PET drink bottles, car tyres, telephones, carpet backings, nitrile rubber hoses, footwear, road surfaces and neoprene items, like wetsuits.
Next time you are playing sport, it is entirely possible that you drove your Shell petrol filled car on a Shell-built asphalt road, walked on a Shell-made artificial grass with your Shell-built sports shoes, and washed down your Shell-manufactured pain-killer with a drink from your Shell-made water bottle. What was that word again? Omnipresent? Struth! Just thinking about all that different stuff made by one company makes me feel like I need a good lie down. Or was it thinking of sport that made me tired? ☺
So now what? You should be aware that there are only a handful companies who control the market for oil and cars. They are not going to disappear, nor will they get smaller. Even if global oil supplies do run out, and we are all forced to drive hydrogen, steam or electric cars, you can be certain that the giant oil companies and car companies will be one step ahead of us. Be assured that the major corporations have already manufactured the new breed of vehicle which will drive us rapidly into the 21st century, complete with its rubber tyres, rubber seals, plastic dashboard and foam seats all proudly manufactured by a major oil company.
When you realise that all of the major companies are interrelated, you start to care a little less which car you are going to hitch a ride with, as you realise that they are merely five carriages on the one train. Climb aboard any one and you will get to where you are going. Invest in any one and you will be sure to make money.
This article, email and its attachments are not intended to constitute any form of financial advice or recommendation of, or an offer to buy or offer to sell, any security or other financial product. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. Oh, and be REALLY careful cos it’s a jungle out there!