BMW Wants Independence From, But Also Cooperation With, Daimler

[JoshCalkins]

News about the automotive industry of late has invariably included talk of companies merging and combining. Fiat is taking a stake in Chrysler, and it's also looking for a piece of GM's operations in Europe, and Porsche is getting closer to Volkswagen. So what of BMW? They have posted losses in the past few months, and the market for luxury vehicles is drying up fairly quickly. Will they be joining up with Daimler, owner of the Mercedes brand? Both yes and no.

The possibility of a BMW-Daimler merger has been around for years. In the 1950s, as BMW struggled to survive, the taking over of the company by Daimler seemed imminent. However, the Quandt family (who had members on BMW's board of directors) injected a lot of cash into BMW in return for majority shares, and the company avoided merger. With the current market, however, talks of a merger are again rising. BMW, whose majority shares are still owned by the Quandt family, don't want a full-blown merger. Instead, they are working with Daimler on a number of initiatives, but still retaining their independence.

One of the cross-company projects is the development of hybrid drivetrain technologies that would deliver the power and responsiveness both brands are known for, but also cut on fuel consumption. Another is a combing of the parts supply system so that their combined bargaining power can leverage a better price from suppliers.

However, while the two companies will share a supply line, and hence their vehicles will have some similar parts, both want their models to remain independent. So, while the cooperation will get better prices for some parts, don't expect to order many Mercedes parts that will fit on a BMW. BMW is dead set on having their brand be different from Mercedes.

The future for BMW, according to some of its operating officers, is in the premium luxury market. The idea being that people will be willing to pay a bit more to get a superbly engineered and constructed vehicle. Also, the company's future endeavors in four-cylinder engines will allow them to deliver models with plenty of power, but lower fuel consumption, putting them in a position to appeal to more upscale buyers who want a nice luxury car, but also want to be eco-friendly.