IN A SPAN of eight days, BMW became the smallest mainstream automaker in the world and lost the two visionary executives who have led the company for the past six years. If ever an auto company seemed vulnerable it is BMW.
All of BMW's direct competitors - Mercedes-Benz, Jaguar, Audi and Volvo - are now departments of giant companies. Surely, it cannot battle them as an independent, especially with Bernd Pischetsrieder and Wolfgang Reitzle gone.
Wrong. Lack of size is not BMW's problem, Rover is. And by the way, there was no compelling reason why Volvo could not have survived on its own.
But now that Volvo has gone to Ford and BMW appears virtually in play, the intellectual debate over optimum size is probably over. The winner by default is size. Size for size's sake.
AB Volvo voted with its feet. It ran away from the auto business. For months, Volvo's top executives had patiently explained how Volvo could and would stay independent. But they didn't really mean it. Why should we believe it when executives at other auto companies say the same things?
The conclusion is that no company that builds fewer than one million units a year can survive in mainstream volume or luxury segments. And even a million a year sounds dwarfish these days.
Conventional wisdom is that car companies can survive and prosper only with high-yield platforms that force lower prices from mega-suppliers. But was Volvo Car Corp. really sold for its own good?
Merger-mania is driven by other factors besides the need for greater economies of scale. The traffic in companies is an industry unto itself and no shareholder or chief executive wants to miss out. But that business has almost nothing to do with the business of making and selling cars.
Why can't 'awkward'-sized companies like BMW and Volvo design cars people want to buy? Why can't they find good suppliers, build cars efficiently, and devise clever marketing, advertising and retail strategies?
Volvo did all that. In fact, AB Volvo should be congratulated on the way it managed its 'little' car company over the past 20 years.
Occasionally, Volvo Car Corp. could lay claim to being the most profitable automaker in the world. Periodic stress in the US, UK and Swedish economies complicated life. But Volvo always bounced back.
It adopted a fewer platforms/more niche cars strategy that made sense for a company producing 400,000 cars a year. It applied flexible manufacturing knowledge gained from the NedCar joint venture with Mitsubishi at its Torslanda plant in Gothenburg. And it has been a leader in retail innovation.
In modern parlance it has built a brand. Volvo Car Corp. is a tough, resilient, entrepreneurial company and Ford is lucky to own it.
BMW's long history of success as an independent speaks for itself. It was only when BMW decided it needed to be bigger and bought Rover that it ran into trouble.
Regardless, the Quandt family that controls BMW says that it will not sell out. Why should they? Can you think of a better place for them to put their money?