19 May 2008

German Rivals To Bury Hatchet In Order To Compete Against Japanese

Mercedes-Benz and BMW are apparently in talks to explore teaming up in developing, producing and purchasing car components. The move marks a recognition by Germany's arch rival luxury car makers that they may need bigger economies of scale to bolster profits (Read: The Japanese are beating them at their own fucking game.)

Executives and engineers from the car divisions of BMW and Mercedes "from the top, right down to the middle management" are discussing how the companies could jointly buy car parts. everything from seat frames and air-conditioning modules to engines and drivetrains.

The current talks seek to identify components and technologies where both companies could cooperate on lowering costs without diluting their brand values or conceding a competitive advantage.

Luxury rivals such as Audi (owned by Volkswagen), Volvo (owned by Ford) and most notably Lexus (expensive Toyota) are able to leverage the resources and scale of larger parent companies. Sharing parts and research, plus making bulk purchases of raw materials such as steel allow them to squeeze costs.

For example, Audi has been able to use Volkswagen's diesel-engine technology and is benefiting from VW's economies of scale in purchasing. Volkswagen makes more than 6 million vehicles a year, including more than 900,000 Audis.

Lexus has been able to launch a hybrid luxury sedan thanks to hybrid technology pioneered for Toyota, which makes almost 9 million vehicles a year. BMW and Daimler, in contrast, don't have rich old parents to steal and borrow from, bitch.

See Also: The Death of the Devil-May-Care Sedan

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