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Western Press Review: Car Industry Sees Mega-Mergers

By Esther Pan/Dora Slaba/Alexandre d'Aragon

Prague, 7 May 1998 (RFE/RL) -- Today's newspapers are abuzz over reported merger talks between two car giants, German Daimler Benz and American Chrysler Corp, in what would be the largest industrial merger in history. Away from the business world, many European papers are discussing the new tension in French-German relations as Jacques Chirac and Helmut Kohl meet in Avignon.

FINANCIAL TIMES: There is no guarantee that this vehicle will make it out of the garage

Today's Financial Times from London analyzes the proposed merger between the Daimler Benz and Chrysler:

"Welding together Daimler-Benz and Chrysler will require skilled mechanics, but should produce a powerful machine. If the ignition fires, Daimler will storm to the number three slot in the US market, behind General Motors and Ford. With Chrysler's strength in light pick-ups and people carriers, Daimler will be well positioned in the fastest-growing segments of the auto market. And its engineering prowess, not to mention financial resources, should help rejuvenate Chrysler's flagging car range.

...Of course there is no guarantee that this vehicle will make it out of the garage. Any deal will have to be structured to overcome hefty tax, regulatory and accounting issues. Other carmakers, meanwhile, have little to gain from a merger that produces a bigger rival with lower costs but fails to remove any of the industry's massive overcapacity."

FINANCIAL TIMES: German companies strive to come to terms with America

Another analysis by Peter Martin in the Financial Times examines changes in the global auto industry that led to the merger prospects:

"Daimler has much to learn from Chrysler, not least how to manage the engineering process to get a wider variety of cars to market more quickly, while preserving a distinct and individual design flair for each model.

But from Daimler's point of view, product questions may be secondary. The most striking aspect of the merger talks, viewed from the German angle, is that they are taking place at all. Traditionally, big German companies have manufactured their goods at home and exported to the rest of the world. Any substantial overseas operations they have built up have usually been achieved through organic growth. Intellectual value-added, product design and corporate momentum have all been firmly based in Germany.

Questions [about management differences] may be too difficult to resolve now - which is why the merger may prove hard to complete. But they symbolize the issues with which all big German companies must cope as they strive to become truly global. These can be summed up in a single phrase: coming to terms with America. Learning to live not just with US product markets, or even US capital, but with the Faustian consequences of both: the US approach to product design, engineering processes and corporate performance. The problem is not that these are worse than German ones, only different. Successful American subsidiaries in Germany and flourishing German off-shoots in the US prove that it is possible to combine the strengths of the corporate cultures at an operational level. The challenge is now to combine them at board level too."

LIBERATION: Chrysler now has to decide if its strategy means a merger that will probably move its command center to Europe

From Paris, Luc Lampierre writes in today's Liberation: "Cultural differences between the two manufacturers leave the biggest question mark on the future of this merger. The size of the two would-be partners and the difference in the value of their shares gives a clear advantage to the German company, which should thus dominate the new ensemble.

Contrary to other sectors like finance or telecommunications, the automobile industry so far had stayed away from the folly of mergers and acquisitions that swamped the news in the last few months. In fact, as Chrysler is now showing, the development of the Big Three, after their spectacular comeback in the 80s, now extends to the international market. Chrysler now has to decide if its strategy means a merger that will probably move its command center to Europe."

LA TRIBUNE DE GENEVE: In thirty years, there will probably be only three or four giant car manufacturers

From Switzerland, Alain Giroud writes in today's La Tribune de Geneve: "If Mercedes Buys out Chrysler, it will be a further step towards globalization. Will the client notice anything? Surely not. Most European cars use completely identical parts. An engine finds itself unmodified on many different models. Your German car was probably constructed in Spain. The VW Sharan and the Ford Galaxy are virtually twins and come out of the same assembly line in Portugal. There are many more examples...In thirty years, there will probably be only three or four giant car manufacturers that will share the cake and offer different versions of the same cars."

SUEDDEUTSCH ZEITUNG: A section of competition is being lost

From Munich, today's Sueddeutsche Zeitung expresses concern over merger-mania: "However meaningful from the point of view of entrepreneurship, the concentration which is again spiraling arouses concern. Even though Daimler/Chrysler are miles away from a monopoly, nevertheless a section of competition is being lost. True, on a worldwide scale even the large ones are relatively small. But if the trend continues then the image of a network economy will emerge in which only a few entrepreneurs are steering fate. But nobody who truly believes in the market can want that. We are not far from this situation in the auto industry. There are barely a dozen concerns which are ruling the worldwide business."

SAARBRUECKER ZEITUNG: Who benefits from the system of giants?

Today's Saarbruecker Zeitung agrees, writing: "The news struck like a bomb. The German industrial jewel Daimler Benz and the third largest US auto-manufacturer Chrysler, which almost went bankrupt in the eighties, want to fuse. Now there has been no dearth in the last few months of reports of excitement-arousing mergers ranging from the Swiss chemical industry to the international bank world. One-time bitter enemies suddenly come together to chase a place in the sun. Equal competition. But who benefits from the system of giants? Mostly thousands of jobs are lost on the way, the giants are difficult to tax, and the cars do not become any cheaper either."

Many newspapers yesterday and today address the recent difficulties in French-German relations as Helmut Kohl and Jaques Chirac meet in Avignon for their bi-annual Franco-German summit.

NEUE OSNABRUECKER ZEITUNG: Underneath all the dissonance there was a harmonious melody

From Germany, the Neue Osnabruecker Zeitung comments: "The Bundestag aftermath of the EU Summit in Brussels left nothing short of fury. The anger over the dispute in filling the position of Chief of the European Central Bank was uninhibited. And yet underneath all the dissonance there was a harmonious melody: the joint recognition of the value of the German-French relations. There was not a single word questioning it. This signifies clearly that the friendship with the neighbor has developed into an unshakable magnitude. Taking this standard into account, worries that relations could be damaged shrink remarkably. The way the SPD and the Greens are reading drama into the conflict is not relevant to the actual facts. In any case, Kohl has a high personal investment, and is seeking to minimize the damage, as are the French."

LIBERATION: The two leaders are sending an image of disunion

From Paris, Nathalie Dubois paints a rather less harmonious picture of the summit in today's Liberation: "A city of theater and schism, Avignon was the perfect stage for the 71st Franco-German summit. Four days after the forceps-assisted birth of the euro, Jacques Chirac has to make his 'friend' Helmut Kohl forget that in Brussels last weekend, he made him go through 'the worst moments of the European construction.' Kohl arrived 30 minutes late to the summit yesterday, because of a prolonged debate in the Bundestag...on the euro. And in spite of efforts on both sides to insure that 'the relation is solid' and to de-dramatize the events of the weekend, the two leaders are sending an image of disunion and every-man-for-himself."

FINANCIAL TIMES: Bringing French and German positions together is often the secret of getting wider EU agreement

Yesterday's Financial Times put the recent troubles between the two countries into perspective: "In the long sweep of the Franco-German relationship enshrined by Adenauer and De Gaulle in the Elysee treaty of 1963, the central bank row [over the weekend in Brussels] would be just a blip if not for an accumulation of irritants and strains in many other areas: reform of EU institutions, armaments co-operation, foreign policy...On top of all this, Mr. Kohl just does not get on with Mr. Chirac as well as he did with the late Francois Mitterand. Moreover there is the prospect that the September's German elections will see the political demise of Mr. Kohl, one of the best German chancellors the French have ever had.

The utility of the Paris-Bonn special relationship...lies in the fact that France and Germany remain such different countries and societies. EU debates...tend to polarize around German and French positions. Bringing these two positions together is often the secret of getting wider EU agreement.

In the next couple of years the EU will have to reform its finances and policies in advance of enlargement. These reforms cannot and should not be settled by Franco-German fixes, but could be complicated by Franco-German rows."