There is nothing new about consolidation in the world auto industry. Mergers, takeovers and even liquidations have been the staple diet of the industry since its inception. Currently, it is going through one of its periods of accelerated consolidation where the process almost becomes one of merger-mania.
This covers the vehicle makers, component suppliers, providers of vehicle purchase finance and the vehicle retail sectors. The interesting thing is that as far as the vehicle makers are concerned, we have been here before. A fever of restructuring has gripped automakers on a number of occasions.
Some economists are convinced that as well as short- and medium-term cycles, there is a long-term, 30-year cycle. Interestingly, every 30 years, there is an acceleration in consolidation and change in the auto industry.
In detail, between 1900 and 1910, the industry appeared distinct from the disjointed production of previous years. Thousands of companies entered the industry, but most quickly died or were taken over.
After all, General Motors was formed then out of 25 companies. Next, between 1930 and 1940, huge changes occurred in the motor industries of Western Europe and the United States, to be followed by another burst of consolidation in 1960-70.
Then, 30 years later, the 1990s have been characterized by a further rapid reduction in the number of independent vehicle makers and a frenzy of similar activity in the component sector, often in the name of globalization.
Although the trend is toward consolidation, new entrants do appear.
Volkswagen AG is a postwar enterprise, as are the South Korean makers and several Japanese ones. With continued economic growth, huge domestic markets will appear in countries such as China and India, and this will support new stand-alone enterprises.
In other words, and notwithstanding further consolidation, the world auto sector is unlikely to end up in the hands of just six global combines.
Consolidation is driven by the necessity to achieve production volumes that will give a corporation most of the available economies of scale and thereby a cost structure that will allow it to operate profitably in an increasingly competitive world auto market.
Until recently, an annual volume of 2 million vehicles would suffice. But now, the required volume has doubled, because of globalization, the need for a wide range of vehicles, and the attendant research and development, marketing and finance.
Most makers think that consolidation puts them in the comfort zone for survival, although some, such as Honda, are wedded to in-house unitary growth to achieve the desired volume.
The lesson of history is that headlong consolidation often ends in disaster.
This is particularly relevant to the components industry, where consolidation has reached manic proportions as companies try to establish a global reach in a range of not-always-related products and to meet the supposed needs of the auto manufacturers.
The experience of British Leyland and Chrysler in Europe in the 1970s is a salutary lesson. One undigested merger was followed by others. When the economic climate worsened, the house of cards collapsed.
Now, the sight of auto companies merging with others just because they were available - BMW-Rover and Nissan-Renault - makes one fear for their long-term prospects.
In the components sector, the position is far worse. A number of disasters are waiting to happen. It is impossible to engage in mergers and takeovers of such size and numbers, often financed by a mountain of debt, without creating an enterprise that is commercially vulnerable.
In short, some of the mega-enterprises being put together in this sector could collapse in a welter of debt, lost jobs and frustrated ambition.
In the motor industry, size gives considerable benefits. However, these are only realized if the large companies are soundly based. In a period of frenzied consolidation, too many alliances eventually will be found wanting.
The history of consolidation during the past 100 years has shown that the wishful thinking of today will be the corporate disaster of tomorrow.