The wheeling and dealing in the auto industry has gone into high gear. Last year's megamerger of Daimler-Benz and Chrysler began the process of consolidation, but it was always just a matter of time. The world cannot support 40 automakers. Manufacturers already have the facilities to make 20 million cars more than the market can absorb each year, and India and China are expected to push their own national champions in the coming years. One study estimates that overcapacity and inefficient supply and distribution chains cost automakers $130 billion a year, a sum greater than the combined profits of the entire industry.
Transformation of the industry is inevitable. The cost of developing a new automobile from the ground up now exceeds $3 billion. Customers are getting choosier, and the need to anticipate future trends -- "smart" cars, green cars, minicars -- demands ever more research and development. In this increasingly competitive environment, economies of scale, expertise and global production and distribution networks will be essential to long-term survival. Within a few years, there will be less than half the number of current automakers. Mr. Hiroshi Okuda, the president of Toyota Motors, envisions a world of five or six manufacturers. Toyota and Honda are almost certain to be among them, but beyond that, anything can happen.
In the wake of the DaimlerChrysler merger, Ford has agreed to buy the cars division of Volvo, Volvo is negotiating the purchase of Scania, the Swedish heavy-truck maker, and General Motors has virtually taken over Saab while increasing its stakes in Isuzu Motor Co. and Suzuki. The big questions now concern the fate of such manufacturers as Fiat, Peugeot, Renault, Nissan and Mitsubishi Motor Corp.