Daimler-Benz A.G. Chairman Juergen Schrempp summed up the impact of the proposed merger of his company with Chrysler Corp. ``We will have the size, the profitability and the reach to take on everyone.'' For suppliers of automotive parts to the two companies, the worry is ``everyone'' may be them.
A typical benefit of two companies joining together is cost reduction. The new DaimlerChrysler A.G. plans to follow that path, listing combined purchasing to cut costs as one of the chief goals of the merger.
That could mean more pricing pressure on tire and rubber automotive component suppliers.
Chrysler and Daimler-Benz already had plenty of clout with their vendors: The behemoth emerging from the combination will be able to demand even more. Automotive rubber product makers that supply just one of the two giants could be particularly vulnerable.
On the other hand, the vehicle manufacturers plan to share components, which could mean new business for some original equipment suppliers. DaimlerChrysler also wants to expand production capacity in general and in Asia and Latin America in particular. U.S.-based rubber companies that have a global bent might go along for that ride, too.
It won't hurt suppliers, either, if the already-good financial status of Chrysler and Daimler-Benz gets even stronger. A financially distressed company is more likely to hack away at suppliers' profits than a firm on solid footing.
Like many events in business, the most important ramifications of the merger of Chrysler and Daimler-Benz might come from companies that aren't involved in the deal.
Other automotive manufacturers could be driven to seek similar combinations to gain enough critical mass to survive against a more-powerful competitor.
If the deal starts such a domino effect, then it changes everything.