German Automakers Decide To Take On Washington’s Auto Companies

It’s going to be very interesting to see how Washington, Inc. copes with a challenge to one of its newest acquisitions. The WSJ reported today that both Volkswagen and BMW are eyeing the U.S. auto market for growth and increased market share.

Sensing opportunity in Detroit’s weakness, Volkswagen AG and BMW AG of Germany are gearing up to expand market share in the U.S. in the next few years.

VW is investing in its first U.S. factory in two decades and expects to triple U.S. sales to one million vehicles by 2018. BMW is introducing a new small car and expanding its distribution network.

“The U.S. will be the growth engine of the future,” Jim O’Donnell, BMW’s U.S. chief, said in a recent interview. “This is where we will continue to focus our efforts.”

There isn’t anything really surprising on the face of this. A couple of weak dominant players are getting challenged by some well run, profitable and well capitalized competitors. Capitalism at its finest. Of course, it isn’t all that simple.

Two of the three weak competitors are now partially owned by the biggest economic power on the planet. Their workers helped elect the new leader of that country and his vision includes a starring role for those weak companies in a green revolution. A sober analysis would conclude that going up against that kind of a stacked deck is suicide. No matter how you cut it, Washington is all in on the auto business and losing isn’t an option.

At another time this would have made for an interesting case study. It probably still will but it will be a case study in industrial policy. Given their familiarity with government intrusion in business, one would have thought that these two German companies would have more sense.

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