CHRYSLER'S ALLIANCE with Peugeot-Citroen, the French automobile manufacturer, fits into a consistent pattern of evolution. Throughout the industry, companies are rapidly trying to build worldwide networks for designing and manufacturing cars, as well as for selling them. Most of the initiative is coming from Europe, where a dozen major companies now compete in a market the size of the United States.
To expand, the Europeans know they will have to go overseas. Volkswagen is now manufacturing in this country. Renault has bought into American Motors, which will shortly begin producing Renault cars in Wisconsin. And now that Chrysler has been shored up by act of Congress, Peugeot-Citroen has lent it some money and is going into several projects to design and build vehicles jointly.
Peugeot is a natural partner for Chrysler. When its financial crisis forced Chrysler to sell its European subsidiaries two years ago, the buyer was Peugeot. Chrysler got not only cash but 15 percent of Peugeot's stock. Now Chrysler will not only help Peugeot sell its cars in North America, but perhaps also collaborate in the next generation of cars that Peugeot's engineers are beginning to design.
The goal here is, of course, to increase their economies of scale -- the low manufacturing costs and solid profits that result from long production runs. The demands for high fuel efficiency are forcing all of the automobile companies into an extremely expensive process of rapid change. Not all of the companies will survive -- but the survivors will generally be those that are able to operate worldwide.
Simply building a small car with high gasoline mileage is not going to be good enough. All of the companies are rushing to do that, and most of the small new cars are remarkable similar to each other. In the history of the automobile industry, the winners have been the companies that succeeded in differentiating their cars in their customers' minds. With fuel supplies tight and increasingly expensive, it seems likely that customers will demand more specialized vehicles.The car built for short-range travel, for example, may be very different from one built for long distance. Perhaps people will choose to buy one kind of car for daily chores, and rent another for family vacations.
The automobile industry now seems to be somewhere around the midpoint of a period of rapid technological experimentation. But while the initial progress toward the fuel-saving car has imposed high costs on the companies, the next phase -- toward greater savings and, simultaneously, greater diversity -- is going to be even more costly. There are no more than four or five auto companies in the world large enough to handle it alone. That's why the others, like Chrysler and Peugeot, are anxiously and rapidly expanding their partnerships.