Global Motors

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It's a jungle out there in the global car business. The economies of scale increasingly favor the multinational giants. And more of the smaller firms are deciding they'll fare best by joining with a strong partner. That's why safe, sensible Volvo of Sweden last week agreed to allow its car division to be bought by Ford, the No. 2 U.S. automaker, for $6.5 billion. The deal takes Ford closer to its goal of becoming a "world car" company. "The beauty of this deal is that Volvo is a premium brand with premium profit margins," says Scott Merlis, who follows autos for Wasserstein Perella Securities.

The industry is left asking--just as it did last year when Daimler-Benz and Chrysler forged the world's largest industrial marriage--which companies will be next? There is talk that DaimlerChrysler has eyes for debt-ridden Nissan. But Japanese automakers have been reluctant to sell more than a minority stake to foreign partners. Toyota remains a respected global player but has suffered along with the economies of all the Asian countries. Similarly, General Motors remains the world's largest automaker, with lucrative foreign alliances, but was set back by last year's strike.

A few chauvinist governments, like those of France and South Korea, will probably resist foreign takeovers. And niche manufacturers like BMW and Porsche, whose ownership is largely in family hands, may also remain independent. Almost everyone else is vulnerable.

This could be a hard time for autoworkers. But the good news for shareholders is that with fewer competing carmakers, stock prices are likely to rise. For consumers, production efficiency could mean less sticker shock.