For traditionalists, the sale of the Swedish car manufacturer Volvo to Ford for a staggering $6.45 billion will be seen as the loss of another strong independent car maker to an American multi-national. In the early 1960s there were over 50 independent car makers worldwide; today there are fewer than 20. By most estimates, there may in future be fewer than 10 as consolidation in the industry intensifies. The wave of mergers and acquisitions may sadden the hearts of traditionalists, but the car industry - like the global computer and telecommunications industries - is in a period of profound structural change. Today the emphasis is on creating manufacturing "synergies" and on cutting costs; big appears to be better. Last year's $35 billion merger between Daimler-Benz and Chrysler, which created the world's third biggest car manufacturer, has concentrated minds in Detroit and beyond. The alliance between Ford and Volvo was not unexpected; the Swedish company had been looking for suitors. Both Fiat and General Motors are said to have tabled rival bids. In some respects, Ford and Volvo seem strange partners; Ford manufactures almost seven million cars per annum, Volvo only about 400,000. But market analysts seem confident the two companies are a good fit. They believe Ford can only benefit by association with Volvo's upmarket image and the premium it places on safety. With Ford holding a cash reserve of some $23 billion, further takeovers and alliances are expected. Earlier this month, the company moved to deny reports that it was poised to purchase BMW and Honda.
The Ford company has come a long way since it was established by Henry Ford, the son of an emigrant Irish farmer, in 1903. Today it is the second biggest car manufacturer in the world after GM (General Motors) and it employs over 350,000 worldwide. It already owns several other brands including Jaguar, Aston Martin and the US brands Lincoln and Mercury. Ford also own some 30 per cent of Mazda. It was Henry Ford who pioneered the production line manufacturing of the motor car. In the process he turned it into an everyday consumer product instead of a luxury purchase. On the basis of yesterday's developments the company would appear to be taking an equally central role in a radical restructuring of the world car industry. In the Republic, the purchase of Volvo by Ford should give the combined operation a market share of about 13 per cent. With car sales climbing to a record 145,000 in 1998, and with continued economic growth, the new alliance is well placed, although the full impact of the changes in the Vehicle Registration Tax - by any measure an unnecessary additional burden on the Irish motorist - is still unclear. On a global level, the car industry - especially in the US and Japan - has had to counter the negative effects of the Asian crisis and the currency crisis in Brazil. It will hope that the kind of alliance announced yesterday by Ford and Volvo will make it easier to ride out such storms.