BMW takes two on merger

Published: 21st May 2007
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DaimlerChrysler, parent automaker of Mercedes-Benz, has already signed the papers to their corporate divorce while their strong rival BMW is planning to launch a takeover bid for Volvo earlier this year as revealed by Autocar. It can be noted that most analysts have expressed their concern over mergers in the auto industry saying that it is not pragmatic. But it looks like BMW just don't want itself to be daunted by the number of failed mergers in the industry and preferred to personally experience it.



Anyway, the Bavarian automaker and producer of high quality BMW exhaust have already requested a complete breakdown of Volvo's financial position from a European investment bank which is handling enquiries on behalf of Ford, the owner of Volvo. Reliable sources have also revealed that BMW has earlier eyed the Alfa Romeo as its takeover target.



According to industry experts BMW is planning to expand its range of brands to support the future growth of the company. Likewise, part of its plan is underpinning the front-wheel-drive Mini division by expanding its output and it can do so with the help of Volvo.



Why Volvo? Company bosses at BMW saw Volvo as the fitting global brand complimentary to BMW, which they deemed has considerable room for growth and room to accommodate Volvo. Although BMW will always emphasize driving pleasure, Volvo on the other hand will contribute safety and environmental concerns to the mix.



At present it not yet clear what BMW plans are but its probable that the larger saloon and estate models of Volvo just in case would be switched to BMW platforms offering both rear-and four-wheel drive. The smaller cars in the Volvo's range would remained front-drive and would probably be merged to the Mini family expanding this model range.



The Mini brand is currently one of the biggest problems of BMW and it has already been forced to allot additional investment just for the redesigning of the new Mini as well as engineering the Mini Clubman estate. But despite all the efforts Mini sales are still down on their 2005 peak and the BMW insiders admit that a total annual output of 250,000 to 270,000 cars is just not enough to secure a profitable long-term future for the Mini brand.



Potentially with Volvo, BMW could build the proposed large five-door Mini and Mini SUV on the same front-drive chassis as the future S40 and V50. And let's just say for the sake of argument that this was done, an annual output of 500,000 upmarket Volvo and Mini front-drive cars could ensure long-term profitability.



The expectation for future profit is not new when it comes to merger in fact every one of those failed union in the auto industry is hoping for the same thing that's why they merge in the first place. Unfortunately, none of those merges survive except for the seven years partnership between Nissan and Renault but even their union is still uncertain and nobody knows what may happen in the future.



And let us not forget that seven years ago BMW was humiliated when it incurred massive losses which forced it to split up and sell the Rover Group which it bought in 1994. The question now is: Has BMW forgets the lessons of the past or has it learned a lot to create a new successful partnership? Well only BMW can answer that.




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