FORD MOTOR Co.'s acquisition of the automobile business of AB Volvo is another indication that the global car-making industry is going through a massive upheaval. In a world where manufacturing capacity exceeds the worldwide demand, consolidation is inevitable. Many weakened European and Japanese manufacturers are likely to combine with stronger rivals before this process is over.
Only the most efficient producers in the strongest financial shape will survive. Well-known but weakened European and Asian car manufacturers, such as Peugeot Citroen, Renault, Nissan and Fiat, have been scrambling to merge. Before the year is over, some of them may combine with cash-rich companies such as Volkswagen, General Motors or BMW.
All of these mergers force us to adjust our basic perceptions about the industry. Car brands can no longer be easily linked to nations. Jaguar, a British luxury brand, is owned by Ford. Volkswagen just bought Rolls-Royce. Formerly all-American brands such as Dodge and Plymouth are now owned by DaimlerChrysler, a hybrid German-American company. Will Volvo remain known as a Swedish car after this merger, or will it become another model in the Ford line?
The more profound effect of these cross-country combinations will be the elimination of inefficient parts and assembly plants. With plants around the world, a company could manufacture engines in Europe, build power trains in Asia and assemble the cars in the U.S.
Fifteen years ago, experts were writing off the American automobile industry. U.S. manufacturers were losing market share, and there was fear they would disappear as did the American television manufacturers. Since then, the companies re-engineered their products, improved their manufacturing efficiencies and began merchandising cars consumers wanted. Had they done otherwise, Volvo today might be buying Ford.