Customers will be the winners

MERGERS can be announced quickly - even mergers of the size of Daimler Benz and Chrysler - but their effect on customers takes much longer. The likely upshot of yesterday's merger announcement is that many more British motorists will follow the lead of PM Tony Blair, and buy a Chrysler. It should also mean modest price reductions on Mercedes-Benz cars.

Chrysler's likely return to the European mass market is good news for motorists, for Chrysler cars tend to be among the industry's most handsome. They also tend to be inordinately good value, for Chrysler is renowned for being one of the world's lowest cost producers. The flipside is that Chrysler also has a reputation for below-average quality, one of the reasons why the Chrysler Neon saloon - already sold in Europe - has proved a poor seller here. The only Chrysler vehicles that do well in Britain are the 4x4 Jeeps, and the big Grand Voyager people-carriers - of the kind which the Blairs selected for transporting their three children.

Mercedes-Benz know-how should ratchet Chrysler quality upward, making forthcoming models much more popular in Europe. New designs will also be more targeted at Europe than existing Chryslers, which have all been aimed at America, the company's only large existing market. In the same way that Ford now develops cars for both America and Europe, so will Chrysler (with the help of Mercedes). The result will be more Chryslers and better Chryslers, including competitors in the Escort and Mondeo classes, probably manufactured in Europe.

Such a corollary is perfect for Mercedes, of course. It wants to stay in the upper-end market, where profits are juiciest and most cushioned from recession. Chrysler, in effect, will be its mass-market brand for Europe, rather like Rover will become BMW's low-end badge, following the Germans' purchase of the British marque.

Chrysler is no stranger to the European market. It bought Rootes, manufacturer of Hillman, Sunbeam, Humber and Singer cars, in 1964, and soon launched a range of Chrysler cars for Europe, including the Horizon and Alpine. The cars were not well regarded, however, and Chrysler sold its European interest to Peugeot in 1978, which rebadged the cars as Talbots.

Despite the size of the company enabling it to cut costs, there won't be any drastic price cuts - the Mercedes-Benz brand is so strong that that shouldn't be necessary. But it should give Mercedes more scope for price readjustments when the car market is weak. The new breed of lower- cost Benzes should start to appear on the market in four-five years, occupying roughly the same sectors the company is in now. Importantly, the increased productivity better enables DaimlerChrysler to compete with its major European rival, Volkswagen.

As Chrysler chairman Bob Eaton said at yesterday's press conference, this will probably be the first of many high-profile mergers in the car business. In every case, economies of scale should be improved - holding out the prospect, for the car buyer, or cheaper cars. The immediate effects of this, the biggest of all industrial mergers, may not be obvious for car buyers. But long term, the effects should be profound - and welcome.

Gavin Green

Editor-in-chief of Car magazine.