There was a brief moment of excitement among investors yesterday when news reports revealed that Ford Motor Company and General Motors Corp. were having discussions of a possible merger. The talks, first outed by Automotive News, likely sent shockwaves through the supplier community, most of whom have already felt the pinch of production cutbacks and cost-concession demands from both automakers.

The rumors followed months of speculation and analysis about a possible global alliance between GM, Nissan, and Renault. (In previous posts, Supply Excellence assesed the impact this potential triumverate might have on supply management goals and the automotive supply chain.) GM is in midst of a 90-day study on the potential union.

In recent weeks, Ford threw its hat into the merger ring, having talks of its own about a potential alliance with Nissan-Renault. Last week’s hiring of an ex-Boeing executive as CEO has only fueled speculation about Ford’s future plans. (Again, Supply Excellence has examined the impact of such rumored moves on both Ford and its supply chain.)

Luckily, the two beleaguered automakers were quick to realize that the potential synergies of a Detroit alliance just didn’t add up. Lackluster sales (and lack of profits), union issues, and a general animosity from suppliers presented too many challenges for GM and Ford to overcome.

Supply Execellence estimates that GM and Ford have collectively removed more than $2.5 billion from their supply costs in the past year using a mix of supplier rationalization, parts standardization and reuse, and landed cost optimization approaches. The automakers are each on track to cut their total supply costs by about 2% this year.

But the end to the short-lived merger talks does not mean that suppliers are in the clear from a GM-Ford partnership. In fact, the automakers have been quietly collaborating on the development of six-speed transmissions that will be used in front-wheel-drive passender and sport utility vehicles from both companies. Earlier this year, GM entered into a similiar joint-venture with DaimlerChrysler AG to develop hybrid-electric transmissions to be used in Mercedes, Chrysler, and GM vehicles. 

Upshot: while a Detroit marriage would be doomed from the outset, expect more dating between the Big Three as well as other global automakers. It is likely that the joint ventures may soon extend beyond joint system or product development to joint development and sharing of supply.