Now what?

The seismograph is still shaking from the pending DaimlerChrysler merger of the century, but the buzz already has shifted to who's next to spring a mega-deal.

Just as the Citicorp-Travelers merger ignited a flurry of shotgun weddings in the banking industry, so will DaimlerChrysler's amalgamation trigger even higher stakes combinations among carmakers.

"There's no doubt this will precipitate more merger talks; it's just a matter of who and when," says David E. Cole, director of the University of Michigan Office for the Study of Automotive Transportation.

A Ford source, who declines to be identified, paraphrases Winston's Churchill's famous wartime utterance: "This is not the beginning of the end nor the end of the beginning but, rather, this is the beginning of the middle. This is just the first one. There's going to be a lot of other stuff shaking out."

Ford, he says, already has accomplished globalization on its own over the past three years via its Ford 2000 strategy. "We are already global; Daimler-Benz is doing it by acquisition."

This industry was built on a foundation of one-upsmanship. General Motors Corp., despite its other shortcomings, has demonstrated the effectiveness of buying components in seven-digit orders from suppliers who can serve GM anywhere on the planet.

"Size and scale are huge in the auto business, and they're only going to get bigger," says G. Richard Wagoner, GM's president of North American operations. Chrysler has proven you can boost profits by turning over engineering and design authority to suppliers without losing control.

There's no guarantee that five years from now Juergen Schrempp and Bob Eaton, prime movers and co-chairmen of the merged company, will be seen as the geniuses they are deemed today. But they have thrown down the gaunlet to their competitors, who are plotting their counter-measures as we write.

Using a combination of reporting, educated speculation and intuition, Ward's Auto World has put together a tip sheet for what's likely to unfold in the wake of the DaimlerChrysler deal.

Let's look at Europe, specifically Fiat SpA. The Italian automaker controls the Fiat, Alfa Romeo, Lancia (reportedly for sale), Ferrari and Maserati car brands; and Iveco and New Holland in the commercial truck market. Fiat is stable, has about 12% of the European auto market and is the leading automaker in Brazil.

Fiat, for the record, maintains it's not for sale.

The company, Italy's largest, is controlled by the founding and still powerful Agnelli family. Although Fiat historically has had a presence in the huge North American market, it has had virtually none since Fiat pulled out its Fiat brand in 1983 and Alfa Romeo brand in 1993.

Fiat is coming off a robust year, with sales in Europe up more than 12% in 1997 and almost 10% for the first quarter this year. Earnings edged up 2% to 2,417 billion lira ($1.34 billion) in 1997 from 2,371 billion lira ($1.32 billion) in 1996.

Government-sponsored incentives helped drive car sales up 39.15% in Italy last year. But the incentives are expected to end this summer, and a drop-off in consumer spending could hit Fiat hard. What makes the company particularly attractive in a global context is its presence in emerging markets such as Argentina, Poland, Russia, China, India and Brazil, where it held 30% of the market last year.

Rumors circulating in Europe have paired the automaker with nearly everyone from GM to Ford to Volkswagen AG.

A Ford-Fiat merger, though both companies deny it, would not shock anyone. The deep thinkers in Dearborn have made forays in Turin before. Ford and Fiat were close to a deal in the early 1980s, but it unraveled when it came time to decide who would run the combined European operations. It didn't help that each company is steeped in founding-family traditions.

Such a deal would leapfrog GM as the world's largest automaker, bolster Ford's presence in Brazil and Argentina and give it an established assembly plant in low-cost Poland.

The down side: overlapping product lines in Europe. Ford and Fiat offer production in almost every segment. That would mean plant closings, killing off some models and prompting cultural resentment in Italy. Still, the chance to wring out excess capacity might be worth it.

"It would bolster Ford's global presence, and it still makes some sense," says Karl Ludvigsen, a former Fiat USA and Ford U.K. executive who's now chairman of Ludvigsen Associates, an automotive consulting firm in London. "But in a situation where both companies compete in the same segments, it's obvious there will be blood on the bathroom floor."

For Fiat, it could mean re-entry into the coveted U.S. market with its Fiat and Alfa brands, but not necessarily. Remember, these deals ostensibly are designed to reduce capacity.

While Fiat officers brush off merger talks, last year Fiat's honorary chairman, Giovanni Agnelli, grandson of the founder, told the Italian L'Espresso that Fiat may be better off in foreign hands.

Mr. Agnelli said he'd rather see a flourishing Fiat in foreign hands than an Italian Fiat in a state of crisis. He also said the partner would have to have a significant presence in the U.S.

If Ford and Fiat are close to a deal, no one is talking. Industry insiders suggest when Paolo Fresco assumes the helm and replaces retiring chairman Cesare Romiti later this summer, a Ford deal could follow. Speculation around Turin says Mr. Fresco, a former vice-president of General Electric Co., was appointed specifically to promote a deal.

But there could well be multiple suitors. GM has its hands full defusing the dissension within Adam Opel AG, but strategically it can't rule out anything. A GM-Fiat deal would preclude Ford becoming the No. 1 automaker. It would solidify GM's emerging dominance in South America and add to its already substantial presence in Eastern Europe.

GM also would get access to heavy trucks in Europe, an arena it abandoned in the '80s, and some advanced small cars. Moreover, with the lira depressed, the price in U.S. dollars might not be all that staggering.

Yet another scenario envisions Toyota Motor Corp. taking a run at Fiat. Also attractive to potential suitors: A manufacturing base in Italy, where the government historically has blocked foreign automakers from entering with production facilities.

Toyota is trying to tailor its cars more directly for European design tastes. Fiat would give it access to some of the best styling studios in the world. Toyota, of course, could help teach Fiat about lean manufacturing and boost its quality.

Beyond Fiat, the next most likely deal will involve one or both of France's suffering automakers, Peugeot SA and Renault SA.

Both companies weathered a severe sales slump last year after government-sponsored incentives expired. Low productivity and resistance to change from both government and organized labor still are problems. Their global expansions are marginal at best.

But any automaker brave enough to tackle the obstacles would have instant access to the French market and at least 10% of the European market.

Renault tried the merger path in the early '90s with Volvo. That fell through at the last minute when both sides felt they were giving up too much control. While Soren Gyll, former cheif executive at Volvo who strongly opposed the deal, has since left, reconciliation is not expected. Late last year both companies sold off shares they held in the other.

Indeed, a GM-Renault match is in the realm of possibility. The companies already have an agreement to jointly develop and manufacture a line of light commercial vehicles. The trucks will be badged as Opel, Vauxhall and Renault vehicles starting around 2000.

Renault currently supplies GM with Trafic vans, which are sold under the Vauxhall/Opel name in limited European markets. Their combined market share in western Europe would surpass Volkswagen Group as the continent's leader.

Peugeot, meanwhile, could prove attractive to anyone looking to expand into China, Taiwan, Malaysia or India. But Peugeot is restructuring its operations to cut costs and increase productivity. More problematic will be the French government. It just isn't ready for foreign ownership of its industrial infrastructure - and the massive layoffs an acquisition could trigger.

While a Renault-Peugeot linkup is possible, don't count on it. There's a lot of product overlap. Together they would have more than 50% of the French market, and a leading 21% share for Europe, but there would be little impact on the rest of the world.

Volvo, meanwhile, officially says it has no plans to restructure its car business and will continue to be a niche player. Reports suggest Volvo is interested in buying Renault's Mack Trucks. Another scenario has VW cooperating with Volvo on the truck side.

Americans tend to assume that either GM or Ford will initiate the next monstrous merger, but Juergen Schrempp was the catalyst for bringing Daimler-Benz and Chrysler together. Given the European Community's apparent approval of a unified currency, German companies are feeling more daring than ever.

Jim Mateyka, vice president of AT Kearney's automotive consulting practice in Southfield, MI, suggests that either VW or BMW will initiate the next step in Europe's shakeout.

"BMW is really the wild card here," Mr. Mateyka says. "They've just been outbid by Volkswagen for Rolls Royce, and now Daimler buys Chrysler, which they were interested in."

There are some bruised egos in Munich. Meanwhile, Volkswagen and its iron-willed Chairman Ferdinand Piech seem ready to conquer the world, yet still can't supply enough cars to meet demand.

BMW is still trying to get Rover on its feet. VW seems to be looking toward smaller companies such as Rolls-Royce and Lamborghini to enhance its engineering image.

"There's no real need for VW to make a leap forward," says Philip Rosengarten, German analyst for Standard & Poor's/DRI in London.

"They're in that league already."

The other stage where a mega-deal could come together is Asia.

That appears to be where GM is focused. It is pushing for a deal to acquire 50% of Daewoo Motor Co. Ltd. That hardly registers on the Richter scale in the post-DaimlerChrysler world. But strategically, it gives GM substantial access to the most-protected market in the world, as well as to Daewoo's new plant in Poland and the Ukraine.

Ford is likely to boost its 17% stake in bankrupt Kia Motors Co. if the Korean government agrees to conditions that would reduce Kia's debt and allow Ford to sell other products there.

Ironically, Daimler owns 2.4% of Ssangyong Motor Co. Ltd., which Daewoo recently acquired. A Daewoo insider tells WAW that the DaimlerChrysler merger will have no impact on Daewoo's strategic discussions with GM. This source also predicts that either DaimlerChrysler will buy Daewoo's share in Ssangyong or a Daewoo-GM alliance will buy Daimler's share of Ssangyong.

Clearly, the most fascinating and unpredictable events will unfold in Japan, where the ability of Nissan and Mitsubishi to compete without a serious injection of new capital is in doubt.

Nissan startled pundits by announcing only days after the DaimlerChrysler deal that it will sell its commercial truck business to Daimler-Benz.

Then there's the inevitable speculation, based on past relationships both companies have had with Mitsubishi, that DaimlerChrysler co-CEO Schrempp will extend his global vision to include the ailing Japanese automaker.

"It's a good time to go shopping. Assets in Asia are getting cheaper than they've been in years," says Edward Brogan, auto industry analyst with Salomon Smith Barney Japan Ltd.

But Mr. Brogan sees Fuji Heavy Industries Ltd., which owns controlling interest in Subaru, and Suzuki Motor Corp. as more attractive short-term. Nissan and Mitsubishi both carry heavy debt loads - as much as $30 billion in Nissan's case - that any buyer would have to assume. Huge debts among Korean automakers are not preventing deals from getting done, however.

Despite Ford's 33% stake in Mazda, it is not at all clear that Japan's insular business and political culture is ready for another Western corporation to control one of its industrial giants.

Still, when asked about what implications the DaimlerChrysler merger might hold for the Japanese auto industry, Shoichiro Toyoda, chairman of Toyota Motor Corp., said such international tie-ups likely will increase.

With a staggering $21-billion cash reserve, Toyota easily could outbid almost anyone if it saw a company that would augment its global strategy. And if Nissan's condition worsens, Toyota could be the preferred buyer in the eyes of Japan's still powerful Ministry of International Trade and Industry. - Senior Editor Greg Gardner contributed to this article.