Daimler, BMW Hooking Up?

With the separation from Chrysler complete, Daimler AG is very likely to pursue closer ties with its archrival BMW, according to knowledgeable sources inside the automaker.

For the past several weeks, the German press has been filled with speculation about joint development projects for everything from small cars to new engines. Moreover, Daimler chief executive officer Dieter Zetsche didn't exactly reject the idea of closer ties with BMW.


Daimler, in fact, made one known but ultimately unsuccessful bid for BMW back in the early 1960s and by and large the two companies have kept their distance for the past half-century or so.

In recent years, however, BMW and Daimler have collaborated successfully in the development of hybrids and more projects are possible if they are mutually beneficial, Zetsche said during the special shareholders meeting in Berlin earlier this month.


Meanwhile BMW executives have been more circumspect about the chances of closer ties with Daimler or its Mercedes-Benz car group.

One Daimler executive familiar with the company's strategic position told TheCarConnection that closer ties have advantages for both companies. Moreover, the joint hybrid development project has turned out to be a test of whether the two companies actually could work together.


The results were very reassuring, he said. "It made both sides more comfortable with the idea," he said.

Both companies are facing tougher fuel-economy and emission regulations in both Europe, North America and even in China. Meeting the challenges posed by the new regulations is very expensive and very complicated for both companies and is a major impetus behind the collaboration, the executive said.

Daimler is also a vulnerable company, the executive said. Zetsche has publicly dismissed the idea Daimler was vulnerable to a takeover bid by a private equity group or by another automaker. Despite Zetsche's assurances, however, without a high market capitalization, Daimler is an inviting target, the Daimler executive said. In fact, a rumor that apparently originated in Tokyo — and then swept through the German stock exchange in Frankfurt in early October — suggested that Toyota was actually interested in buying Daimler AG.

The idea Daimler was about to be swallowed by Toyota was dismissed by a spokesman for the German automaker. However, the idea did cause a stir and wasn't dismissed out of hand by outside analysts, who noted Toyota could always sell off some pieces of the company to pay for the transaction.

Moreover, while the German industry remains sheltered, in some respects, companies like Daimler have relatively few protections from an outside bidder, the Daimler executive noted.

Thus the new Daimler is under intense pressure now to keep its stock price or capitalization relatively high. The need to bolster the market capitalization also means Daimler will have to become much more cost-conscious than in the past when Daimler-Benz was noted for its open-handed spending policies.

BMW also faces its own problems. Its decade-long run that has brought it so much success appears to be losing some of its momentum, putting added pressure on the company's management.

The company's owners, the secretive and enormously wealthy Quandt family, also are coming under new scrutiny in Germany. A new television documentary has raised questions about the use of slave labor under the Nazis by BMW and its subsidiaries and by extension the Quandt family.


BMW has attempted to address its past by allowing academic researchers into its archives. The publication of their findings, however, as been limited. The company plans to more openly deal with the matter with a specific display scheduled for inclusion at its new, company museum.


The examination, however, is bound to raise collateral questions about whether the Quandt family is prepared or in a position to protect its ownership stake in the company in years to come.

Related Articles


Daimler AG Takes Shape by Marty Padgett (10/4/2007)
DaimlerChrysler laid to rest in Berlin.


Small is Beautiful in Frankfurt by TCC Team (9/13/2007)
Green rules the day in the Messe halls.


Daimler Earns Less, Buys Back Stock by Joseph Szczesny (8/29/2007)
Chrysler deal done, Mercedes earns big.

The Car Connection Daily Headlines
I agree to receive emails from the site. I can withdraw my consent at any time by unsubscribing.
Thank you! Please check your email for confirmation.