THE AUTO industry in 1998 seems to be more or less a reflection of the personal battle being fought between Ferdinand Piech and Juergen Schrempp in Germany.
The rolling and tumbling of these two giants is reshaping the world automotive landscape.
Schrempp may have suggested a merger to Chrysler's Robert Eaton because he fears Volkswagen's entrance in traditional Mercedes-Benz luxury segments. With a volume base to spin off prestige cars, Piech and VW could do in Europe what Toyota did in the USA with Lexus a few years ago - offer comparable quality at about 70 percent of the Mercedes price.
Piech went hell-bent for Rolls-Royce because it lends credibility to his upmarket strategy, which is a reaction to Daimler-Benz's thrust into the Golf segment with the A-class. Schrempp will answer VW's Rolls acquisition by authorizing production of the Maybach.
Meanwhile, Daimler's status as the world's commercial vehicle leader has moved Piech to approach Renault VI, MAN, Scania and Volvo about acquiring their truck businesses.
For Piech it is not really personal. Volkswagen's margins have never been great, even in the best of times. So he is not dabbling in luxury cars just to put a halo over lower-priced VW models. He needs to earn big margins in the profitable luxury segments.
Volume makers used to make tons of money with models like the Ford Scorpio and Opel Omega. Then they all but abandoned the market for larger sedans to luxury makers Mercedes and BMW.
'Make-everything' companies were at a disadvantage and it wasn't only due to lack of brand appeal. BMW and Mercedes have had economy-of-scale advantages over much larger companies in the rich segments. Full-line automakers had to base their big cars on smaller-unit platforms because they sold fewer of them.
That is changing. Next year Volkswagen will introduce a new flagship based on the Passat platform.
Schrempp's likely response will be to mimic Piech's platform strategy, putting all Mercedes-Benz and Chrysler cars on common platforms. Jaguar uses Ford platforms. Saab underpinnings are shared with GM cars. Volvo and BMW may be forced to do something similar. Lately, rumors have Fiat's Gianni Agnelli in talks with BMW's Quandt family.
The wheel keeps turning, driven by Daimler-Benz and Volkswagen.