LONDON - Just as General Motors was celebrating a major strategic triumph over its archrivals - acquiring a stake in Fiat Auto - Ford Motor Co. shattered its moment of glory.
Ford President Jac Nasser out-maneuvered his Detroit rival and bought Land Rover from BMW.
Luxury brand-poor GM needed the off-road jewel in the worst way, but Ford got there first. How? A Ford insider said Nasser 'just dared suggesting to (BMW Chairman Joachim) Milberg a deal and presented the concept to him.'
Sources say General Motors may challenge Ford's memorandum of understanding with BMW. GM has no choice but to try. It is in danger of getting crushed by Ford and DaimlerChrysler in the global luxury-car wars. That's a huge problem for GM - especially in Europe, where profit margins on mainstream small cars are shrinking.
Now more than ever GM needs BMW. And if the Quandt family decides to sell, GM can't afford to lose it. Except for tiny Porsche, BMW is the only independent luxury brand left in the world. Everything else has been snapped up.
But the Quandts may be less likely to sell now than ever before. Rover is gone and the crisis is over. When the Rover turmoil subsides, BMW will be back where it was in 1993 - sadder, wiser, but after selling Land Rover for A3 billion, not necessarily poorer.
Analysts are hiking their BMW forecasts.
'Management has made the critical decision to stop plowing over A800 million a year into a return-destroying enterprise,' said Morgan Stanley Dean Witter in a research note.
Meanwhile, GM must be deflated after missing out on BMW's luxury off-road unit. With only Saab and Cadillac, GM is far behind Ford and DaimlerChrysler in the high-end sales race. DCX has Mercedes-Benz. Ford has Lincoln, Volvo, Jaguar, Land Rover and Aston Martin.
With Land Rover's 178,000 sales worldwide last year, combined volume for Ford's Premier luxury brands in 1999 would have been almost 850,000, compared to 322,247 for Saab and Cadillac (132,000 for Saab, 190,247 for Cadillac). In three to five years, the combined Premier brands are expected to sell at least 1.25 million vehicles.
Cadillac has never established itself outside the USA, and has been under assault from European brands and Lexus at home. Saab is global, but grew little in the decade that GM has controlled it.
GM needs to enrich its product mix in Europe.
'Profitability per unit in Europe is thinning every month - especially for GM and Ford,' said Peter Schmidt, an analyst at Automotive Industry Data in the UK. 'Bigger cars are more profitable, but GM's Omega is being squeezed and Ford's Scorpio has been dropped. Ford has shored up its portfolio in that sector, but GM has a huge problem. If anybody needs a brand like BMW in Europe it is GM.'
All is not lost for GM. The Fiat deal brings upmarket Alfa Romeo and Lancia into the GM family. Alfa's brand reputation has soared since the 156 was named Europe's car of the year in 1998. Meanwhile, Fiat is working to rebuild Lancia.
And through its 'network of alliances' strategy, GM may have an advantage when it comes to convincing the Quandts. GM has proven with the Wallenbergs of Saab and now the Agnellis of Fiat that it can work with proud automotive families. In the case of Fiat Auto, in which GM bought 20 percent, control will stay with the family. Ultimately, that could make a difference to the Quandts.