Consortia are similar to joint ventures and could be classified as such except or two unique characteristics: (1) they typically involve a large number of participants and (2) they frequently operate in a country or market in which none of the participants is currently active. Consortia are developed to pool financial and managerial resources and to lessen risks. Often, huge construction projects are built under a consortium arrangement in which major contractors with different specialties form a separate company specifically to negotiate for and produce one job. One firm usually acts as the lead firm, or the newly formed corporation may exist independently of its originators.
Without doubt the most prominent international consortium has been Airbus, Boeing’s European competitor in the global commercial aircraft market. Airbus Industrie was originally formed when four major European aerospace firms agreed to work together to build commercial airliners. The four partners are France’s Aerospatiale Matra, Germany’s Dasa aerospace unit of Daimler Chrysler, Britain’s BAE Systems, and Spain’s Construcciones. In 2000, the four agreed to transform the consortium into a global company to achieve operations efficiencies that would allow it to compete better against Boeing. Meanwhile Boeing is joining together with its own consortium to develop new 7E7 aircraft.
Sematech the other candidate for most prominent consortium was originally an exclusively American operation. Sematech is an R&D consortium formed in Austin, Texas, during the 1980s to regain America’s lead in semiconductor development and sales from Japan. Members included firms such as IBM, Intel, Texas Instruments Motorola and Hewlett Packard. However, at the turn of the millennium even Sematech went international. Several of the founding American companies left and were replaced by firms from Taiwan, Korea, Germany and the Netherlands (still none form Japan). The firm is also broadening its own investment portfolio to include a greater variety of international companies.
All such international contractual agreements can run into problems. Ford and Nissan launched a joint venture minivan in 1992 called the Mercury Villager / Nissan quest. The car was mildly successful in the US market but in 2002 the joint venture stopped producing the cars – that’s two years earlier than the original contract called for. Now that Nissan is controlled by French automaker Renault, it began producing its own minivan in 2003 for sale in the United States. When General Motors formed a joint venture with Daewoo its purpose was to achieve a significant position in the Asian acre market. Instead, Daewoo used the alliance to enhance its own automobile technology, and by the time the partnership was terminated GM had created a new global.
Nestle has been involved in a particularly ugly dissolution dispute with Dabur India. The Swiss firm owned 60 per cent and the Indian firm 40 per cent of a joint venture biscuit company, Excelcia foods. Following months of acrimony in March 2000 Dabur filed petition with the Indian government accusing Nestle of indulging in oppression of the minority shareholder and of mismanaging the JV Company. In particular, Dabur alleged that Nestle was purposefully running Excelcia into bankruptcy so that Nestle could wriggle out of its non-competetive obligations and go after the India- biscuit market using another brand. Nestle countered that the problem had more to do with the partners inability to agree on a mutually acceptable business plan. In June of that year the dispute was settled out of court by Nestle buying Dabur’s 40 per cent interest shortly which Excelcia was closed in lieu of restructuring.