Friday, 15 July 2011

Macro Level Trends - EU Economic Fracture - Powering Member States' National Agendas

The previous 2-speed EU (exemplified by a 'core' of Germany-France vs the 'periphery' PIGS states) is now being described as a 3-speed with Spain, Belgium and Italy viewed as 'soft-core', a label now applied to France, the markets now recognising that it cannot realistically be viewed as strong as Germany.

European woes continued this week as the contagion-effect of national debt worries spread across from Greece into Italy, participants within the capital markets are concerned about remaining in situ with large exposure, understandably skittish about being ultimately forced by Brussels to take the 'creditor haircuts' which look increasingly necessary on to support national well-being and EU unity.

This week saw the markets react to Italy's exposure as the world's 3rd biggest debt market at E 1.6 trillion ($2.23 tr), one in which liquidity has become less 'fluid' and more 'viscous' under the skittish conditions, Italy itself now viewed as moved from 'soft core' position to 'peripheral', this reflected by a 18% appreciation of its 10-year bond yield since 1st January (peaking at 20%) vs Germany's -5%.

Thus in effect we see a 're-rating' of the French and Italian economies, the former also unfortunately tied-into Italy as perhaps the biggest creditor within the Italian debt market, itself holding $393 billion.

Long-term capital markets confidence in a nation's debt servicing capabilities is of course a construct of that country's structural economic strength and the political ability to withdraw monies from households, firms and public expenditure. As is obvious, the stronger the economy the less pain induced. The weaker the economy the more pain, often consequentially creating a negative downward spiral in which the very government revenues themselves undergo real-world contraction, so de-stabilising the ability to pay the national debt.

[NB Though 'in denial' this is now the USA's emergent position].

Thus we see that Germany and Italy presently stand-on contrasting 'solid' and 'crumbling' economic foundations, the stereo-types, proving true, and presenting the administrations of both countries with respective macro and micro challenges.

Whilst an increased 'freedom of capital' through international exchanges has propelled globalisation, the very structure of a country's own commercial foundations and its financial exposure has now come to the fore for not just Germany and Italy, but for all in the West.

'Economic planning' is a term more associated with China's state-apparatus and those countries that were once deemed '3rd world', but it is a notion which remains subtly implicit in Scandinavia and Germany whilst seemingly gladly abandoned by southern Europe after post-WW2 reconstruction and 'rural-region improvement; effectively ended by the early-1980s.

However, the collapse of Communism meant that West Germany (FDR) had to plan for the 'digestion' of the old East Germany (GDR), thus in reality economic planning has been intrinsic to the Germany governmental mindset since 1945; indeed arguably since the early 1930s hyper-inflation and so since 1936. During that era of course Germany and Italy formed ever closer technical ties in the hope for forming an influential economic bloc of its own – this ambition assisted by annexation, effectively a land & commodities seizure - thus concerning Britain and leading to WW2.

Today the picture looks very different, economic ties are and have been maintained - with examples such as VW's purchase of the sportscar maker Lamborghini SpA, the styling house Giugiaro & intent toward Alfa Romeo – but that relationship has been massively over-shadowed by Germany & China, the recent $15bn trade agreement.

The ability to understand and indeed form the future has been the key to a country's commercial and global success; the industrial age reflected by Britain's initial iron-work innovations through to Japan's more recent innovations with hybrid-propulsion; both technical advances commercialised, in turn providing national power at home and abroad. Both examples quickly integrated into broader realms of formalised national economic planning by forward-looking governments. However, economic advancement is typically an evolutional process reliant upon the refinement and scale-efficiencies of conventional technologies that sit within an envelope dictated by the PESTEL norm, and so the internal combustion engine today still sits unequivocally centre stage.

Advancement of ICE from 2-stroke to 4-stroke, to hemispherical cylinder heads, to aluminium & plastics applications, to lean-burn technologies to cylinder de-activation and more means that ongoing MPG & Km/L improvements – along with lightweight body structures – mean that evolutional efficiencies can be typically engineered into future generation vehicles. This 'steady state' improvement process then in tune with real-world infrastructure and allied industries and for the firm itself critically not disruptive to past, present and future CapEx plans.

The planning of new generation engine families sits at the heart of a 'full-span' automotive producer, and encompasses a broad realm of internal and supplier participants. Given an approximate 20+ year life-span of the typical 'family' of engines (ie derived from the same prime parts) the need to plot a convincing path for both the engine's programme delivery and its 'life-cycle' applications is critical. This ideally woven into the broader (implicit or explicit) national economic plan.

[NB perhaps the simplest prime example is the original VW Beetle frame and its boxer engine, designed initially to provide spin-off variants for military use, with post-war applications in van and coupe forms. This a relatively simple are wholly aligned example of the technical planning behind war-time and peace-time economic planning].

However, there is no doubt that the ability to 'synergise' the technical planning of a multi-national 'homeland champion' firm and the domestic & foreign economic ambitions of government is a critical exercise.

And it is here, in the ICE power-train arena, that the relatively recent launches and announcements of FIAT's 'twin-air' engine and BMW's 'small-straight 6' provide interesting cases for evaluation that reflect the innate planning mindset difference between two structurally different companies from two culturally different homelands.

The 2 cylinder 875cc 'twin-air' is a small capacity super-charged unit developed by FIAT's powertrain company FPT, one with philosophical historic links to the original 2-cylinder Topolino (Little Mouse) and Nouvo Cinquecento (500). Thus it was intentionally designed for small car use, but as of yet the ideal lightweight small car has yet to be developed, though past concepts show ideas around a light-bodied Seicento vehicle. It was also designed with the idea that it could be accompany an electric motor to create a true hybrid power-train system

Though showcased on the 'Panda Aria' and destined for Panda use in Italy, 'twin-air' has gained most profile in the retro-styled present 500. This a far larger and weightier car than the original Cinquecento (940 kg mass vs 499 kg mass) and sold to customers on its CO2 eco-credentials of 92g/km, its 'spritely' city performance due to mix of pressure-fed unit offering 85HP and low-end gearbox ratios.

Beyond homeland application, FIAT Power Train (FPT) will have created the engine with contract manufacturing aims in mind, an element of the FIAT demerger into separately listed Cars and Industrial companies, FPT itself rationally split between the two, concept work staying with Cars and production with Industrials. This then means that Cars can conceptualise other vehicles around 'twin-air' (as ICE only or as hybrid-linked) and the Industrials company can seek outside 3rd party VM customers for contract manufacture. Thus a prime remit is that they must find a new client-base for the 'twin-air' engine, a 4th engine type directed at small cars to be added to the portfolio of larger petrol and diesel engines directed primarily at commercial vehicle markets.

A notional first client would be Ford since the 500 shares its basic architecture with the Ford Ka, so theoretically it could also be installed in this city-car. But whether Ford will choose to do so when it itself has designed a small capacity CVT-linked engine is questionable. Ford will very probably want a single family engine solution which can span eco-to-performance variants given desire to recapture the sporty small car niche against Twingo, Fox/Polo etc, so would ostensibly seen an engine architecture which has in-built machining flexibility of bore & stroke dimensions, aswell as mating to various gearbox types. (This is not to say it might not wish experiment with 'twin-air' for R&D or marketing purposes on a limited installation, but the re-engineering project costs in this still fiscally tight budget environment would probably prohibit such a move).

So FIAT will need to look further afield through Europe, Japan and Asia. This means almost 'automatically' beyond the self-sufficient Germans, though there could be the possibility of a JV with VW's SEAT, harking back to the FIAT derived Spanish cars of yesteryear, though it could be potentially planning to strike at the city-car heartland (v Smart) given its lack-lustre results in B & C segments throughout the EU, this though would also strike at FIAT's ambition; if so a JV unlikely.
Contract manufacture to France would seem more tenable, though the larger Renault less likely to be courted than PSA given established links, especially so if either were to create a PSA-FIAT JV for a next generation city-car that supercedes the innovative but unloved 1007.

Further afield potential lies in India with TATA's Nano and its derivatives (such as Pixel) aswell as possibly being used as a technology base to re-liven the Maruti 800 or indeed even a new Hindustan-Premier small car. Thus 'twin-air' would follow in the Indian footsteps of Vespa Scooter, FIAT-Premier 1100 etc.

FPT will try to sell the unit to Japan's small car fraternity led by (largely Toyota owned) Daihatsu, Suzuki with its Indian small car base which itself contract manufactures for Nissan. 'twin-air' could then play a part in a possible new kei-car revolution as part of Japan's own rebuilt and its Asian production ambitions.

The greatest paper-based potential is of course China, driven by its own internally directive-led requirement to reduce CO2 in coastal cities whilst also boosting its state-owned car companies access to next generation foreign technology. The Agnelli heirs through their investment vehicle EXOR and Sergio Marchionne may well see 'twin air' as one of their prime bargaining chips to grow their own FIAT interests in China. This the typical exchange basis of market access for technology access so attractive to PRC leaders. But the real question lies with the Chinese consumer and his/her willingness to buy a 2-cylinder engine. Even if proficient as the 'twin-air' undoubtedly is, It has perceptional over-tones of 'rudimentary', akin to a motor-scooter engine. And so probably undesired even in a Chinese-badged entry-level car, let alone a foreign import vehicle from Italy, the land of Prada and the Gucci 500.

However, all this 'potential' is still far from assured with no doubt confidential conversations with these 'prime-potentials'. For the short-term FIAT must rely on itself and its close governmental connections to ensure the initial pay-back of the 'twin-air' project. The sales of the 'twin-air' undoubtedly broaden the 500's appeal, but it is realistically this is an Italian proposition for the near-term, emotionally a closer 'reflection' of the original 'Dolce Vita' icon, whilst rationally answering the by-pass need of expectantly heavier vehicle taxation demands that the cash-starved government will set.

FIAT Industrial-FPT will probably also seek to either dissolve or not-extend relations with its regional sales partners around the world (eg IVECO in the UK), creating its own international sales force so as to regain the 'lost' commission-margins on unit sales, thus boosting top and bottom-line income figures on what it sees as a high-margin cars-directed business stream. But this is still some time away before coming into fruition, much dependent on the technology strategies of other VMs, who themselves may be pressured by internal need for powertrain scale (eg Ford) or for any 're-emerged' Indian producers enticed/pressured by whole vehicle 'badge-engineering' deals which would suit their necessarily low-overhead, frugally man-powered, re-start operation.

Thus it appears that FIAT wishes to replay a well trodden path of its industrial past, understandably directing new technology development at its home market needs whilst viewing the theoretical potential for such a eco-solution amongst previous JV partners and new EM based partners. Yet the world is a very different place compared to its exports not just of the 60s and 70s, but even that of 'technology diffusion' projects in even relatively recent years.

The broad-brush PESTEL potential of the 'twin-air' engine programme no doubt makes sense when posited on paper as part of a big-picture strategy vision to split FIAT into two halves, provide respective autonomies and court investor interests. But very close inspection of the real-world conditions must be undertaken when 'twin-air' is being marketed as an installation package to others.

Ultimately the ambition of 'scale-up' or 'replacement capacity' of production depends upon not only the actual extent of 3rd party demands, but also upon practically 'lining up those ducks into a row' that produces a steady flow of demand, production consistency and thus income consistency - for not only FIAT but Italy itself. Much of the 'twin-air's' future fortune then lies outside of Marchionne's direct control, instead marketing the unit to build the FPT order-book.

Such a 'mixed market' manufacturing ambition dependent upon internal and external demand balance inherently imbues a higher level of income-stream risk both in securing the 3rd party orders and in securing them; something investors in FIAT Industrial may wish to consider when forecasting its income expectations. This income variability to the internal value-chain is not so wide within companies which produce solely for themselves, especially so if the technology developed plays a defining role as central to brand values themselves.

This is the case with BMW's more controlled and exacting attitude toward technical application, production scale-up and income stream assurance, the case presented here being its new innovative small-straight six cylinder engine.

The straight six cylinder engine has become BMW's hallmark, kept alive long after other marques 'moved-on' with V-pattern sixes – although of course BMW also uses IL4, V8 and V12; but the company legendary straight six was retained and constantly refined to provide a unique brand character of combined smooth power delivery, C of G dynamic balance and RWD vehicle packaging. The straight six then is integrated into BMW Car's DNA. But the company also has a legendary Motorcycle division, in which the Tourer-bike has carved a highly regarded idiosyncratic niche and competitive advantage.

BMW has now combined these 2 'brand levers' by way of developing a 1600cc small-block straight-six engine for instillation into its 1600GT/L motorcycle model-line. Though not a first in using a straight six on a bike – American custom-builder renowned for it – it is the first to design the engine from scratch and install the unit transversely on a bike: the all new small-bore design required to comply with the bike-frame's width itself rooted in cornering angles and mass transfer tolerances.

At first sight this may look like little more than a BMW ego-boosting exercise displaying its technical capabilities to add brand distinction to its Tourers.

But investment-auto-motives believes that Munich has intentionally build the small straight-six into its bikes as part of a new technology design, build and real-world prove-out that will eventually feed into its small cars and sports cars. The short length engine allowing for a unique transverse straight-six either front or rear 'mid-mounted', aswell as conventionally laid out in a longitudinal fashion. Here, with improved engine bay packaging, to assist either crash protection when front mounted or luggage capacity when rear mounted. Moreover, its smaller size enables the coupling of hybrid-power ancillaries.

Thus in an age of necessary engine capacity down-sizing BMW seeks to retain its mechanical heart through shrinkage rather than replacement with an alternative 'sub-standard' unit. Furthermore, it could possibly replace its current IL4s with this unit to re-apply the 'BMW standard' from city cars to 3, 4 & 5 series, additionally 6,7 & 8 series as potential hybrids.

Of particular interest would be its possible use on the MegaCity ' i ' labelled city-car product. Although engineered as a lightweight EV to conquer this customer space, as a 'fall-back' option, the engine could be physically halved and re-engineered as a 3 cylinder 800cc unit and installed into the carbon-fibre sub-structure to give what would be a ground-breaking Low Emissions Vehicle (LEV).

[NB The FT reports that E46m of German regional government funding will assist the E368m MegaCity EV project costs, this to be reviewed by EU officials to ensure that the provison of the funding adheres to EU assistance criteria. Given the perilous state of EU finances, a clause could be added which claws-back the funds if indeed the primary EV path fails to deliver and the small ICE path is followed. A mutually suitable arrangement could be that the E46m is offered with no premium to the EcB base-rate. If ultimately MegaCity production is split between EV & LEV to maximise market acceptance, a % of claw-back format should be used, based on either the split between EV & LEV installation project costs or as a ratio of the production split over the first full production year].

A 'halved' 3-pot engine then offers competition to FIAT's 'twin-air' and Daimler's Smart unit.

As can be seen, the innate advantage that BMW has over its rivals (excluding Honda) is that as a broad-spectrum vehicle producer - spanning cars, quad-bikes, motorcycles - it can explore technical synergies across vehicle genres which provide an automatic advantage in both conceptual thinking and execution. Within execution it has a 'Russian Dolls' ability to scale-up the production capacity of such transferable technologies when passed on from the motorcycles division to the cars division. (Indeed, the former can even be feasibly be used as an sub-module assembler for the cars division if the business case proved worthy and factory & labour capacity was freely available).

This separate but closely couples twin division corporate structure (excluding the 3rd finance division) thus allows for intellectual conceptualistion, R&D exploration and 'scaled production' freedoms that are rarely found within other volume manufacturers; since historically they have typically shed non-core production activities to allow for single sector business concentration, the disposed division thus financial injections to do so.

This is an understandable rational and indeed prescient to the basics of the capital markets investment philosophy, one that the magic formula of scale to set economies to set pricing power to set market share capture, all adding to unit and operating margins, profitability and ultimately shareholder yield and market capitalisation value.

This then indeed is the magical set-formula in a sector where a company or companies can effectively plan to control the arena, usually in a sector's initial flourish or after major economic disruption, when they have access to funding that allows them to buy flailing competitors. It was the approach taken by William Durant and Alfred P Sloane at GM and has been the standard expansion model ever since.

This 'American' finance-driven approach has its roots (largely in part) stemming back to 16th century Italy, this method employed by the Medici banking clan to maintain and control its various interests in various trades; the template propagated and used worldwide ever since.

Though of course German bankers are well attuned to German corporate ambitions, the country's combination of regional 'feudal-industrialist' families with onus on technical education for the masses. This has meant that the 'German' approach continues to be one of economic advancement through close-knit relationships and technical progression - even though 'feudal-industrialists' such as the Quandts are far less 'hands-on'.

[NB Unsurprisingly it was the German model that Japan looked to pre and post WW2].

This then illustrates the German attitude toward long-term technical planning which has very deep roots in supporting a diverse vehicle industry and supply base which in turn economically and literally underpin its nation's expansion; and that of many others. This industrial reach seen by VW Group's Piech's desire to create an ever broader conglomerate spanning from (Porsche) sportscars to (MAN-Scania) heavy trucks, and Daimler's vehicle portfolio which spans from (Smart) city-cars to (UniMog) off-road vehicles.

The Italian v German difference then at its heart can be simplistically distinguished as a 'micro-level' attitude versus a 'macro-level' attitude. Yet the inter-relation of a politically-led national industrial agenda and the socio-economic importance of big business - especially in apparently 'socialist' countries – add additional shades of complexity to that simplistic fundamental description.

Italy's post-war rebuild period, saw the state effectively set central-control demands of its industrialist families, the Agnelli's of course prime intermediaries. Long forgotten examples of product & brand diversification were deemed necessary to re-build Italy and maintain its momentum, 'empty segments' were to be filled by those companies with spare capacity, thus leading to (to our eyes) oddities like the Alfa Romeo T10 'Autotutto' small van. The volatile Italian economy and harsh export conditions and environments meant that FIAT eventually swallowed-up many of the flailing domestic marques (in the GM manner) , today having interests spanning Piaggio scooters & mini-trucks to of course Ferrari SpA.

This should then give it the ability to (like the Germans) explore cross-company and inter-company synergies. Yet although interesting new products do periodically arrive on the fringes – like the Piaggio MP3 tilting 3 wheeler – the FIAT's historical modus operandi toward scale-efficiencies of passenger car platforms, and one would think a core competence by now, is witnessed again with the Chrysler acquisition.

A 'scale ambition' thus dominates over ideas of truly 'engineering the brand' or 'technical visioneering', both of which require deep technical planning with long-term commitment, especially so when properly married.

The Italian-American stance is then 'corporo-sociocratic'.
The German stance is then 'aristo-technocratic'

Much of this of course influences – and is influenced by – intrinsic cultural behaviours which tend to either the short-term or long-term, this much influenced by the general attitude of company owners, whether privately held or publicly held or if mixed with institutional investors the critical attitudinal alignment of mingled-ownership. Since these form the primary raison d'etre regards the appointment of specific Chairman, CEO and senior executives and so the very structure of the company.

It is here the innate differences between BMW AG and FIAT (Autos & Industrials) become apparent. Specifically, the relative simplicity of BMW's 3 divisional entity compared against FIAT's conglomerate complexity, now its dual company, multi-divisional form.

That simplicity allowed for a rapid BMW rebuild in the 1960s after its 1950s financial woes, it allowed the Quandt family to exercise acumen when appointing senior executives ever since, and allowed it to act unhindered when it seized Rover Group to capture MINI, sell-on the unwanted brands and acquire Rolls-Royce. It has allowed it to build the Motorcycle division slowly but surely taking 'ownership' of Tourer and 'Dakar' segments. And critically it allowed for total control of the key arenas of R&D and financial services, thereby creating a systemic and coalescing industrial eco-system for itself, its stakeholders and as a contributor to Germany at large.

Yet without a stable political, economic, financing and social environment BMW would have faltered. A post-war stability was engendered through West German unity and the 'protestant work ethic' (to quote Prof Ferguson) which underpinned the rising value of the Deutschmark. That allowed for an 'easier' well managed incorporation of the GDR in 1989 whilst the FX currency advantage promoted a favourable accommodation of the new Euro in 1999, which coupled to booming EM export markets over the last decade. A 60 year era of general domestic and international stability by which BMW itself flourished.

Historically, it could be argued that FIAT has been of lesser service to itself than to the Agnelli family, the Italian finance community or indeed the immediate government-led policy needs of Italy itself. But then as the national champion it was perhaps always given greater operational freedoms and indeed policy-led directions and assistance than would have been the case elsewhere. This especially so in old Eastern bloc states where FIAT had become a major (often sole) automaker. These circumstances gave it a form of insularity and pseudo-protection for many decades, but the massive globalisation era of 1990s & 2000s and collapse of CIS markets highlighted just how competitively remote FIAT had become on the world stage.

It too suffered from the instability of mid-late 20th century Italy, where politics where as volatile as the Italian economy and thus the Lira. Though consumerism grew a general unease amongst the populace & workforce meant that their emotional investment remained regional & local. FIAT's national geographic reach meant that it became a type of de-facto 'nanny state', a mentality only now eroding. However, its now abandoned role of corporate welfare provider along with the concerning condition of national finances threatens social stability; public-sector budget contraction and necessary private and corporate de-leveraging means increased societal angst.

The powering of the national economic agenda within the ever more complex and less obvious international back-drop is of course the primary challenge facing EU member and western governments. Concerned about loosing the headway gained over 2009-11, the bond markets are informally but effectively constantly 'stress-testing' the innate worth of all EU states'; hence: 'core', 'soft-core' and 'periphery'.

Beyond the detail of country-specific econometrics, this then puts each of the countries placed within those 'bands' on a different 'investment footing'. Whilst those place in 'core' and 'soft-core' realms have the foundational strength to re-buoy – resulting from the 'circularity of corporate activity, more dynamic labour markets and educational/training structures - the real concerns lay with the acute socio-economic structures of the 'periphery' where corporate activity is heavily dented and those educated or young will typically seek opportunity outside the country or region. This concern was all to obvious by the lacklustre reaction at the 'Grecian Fire-Sale' meeting held at the Claridges hotel in London only a few weeks ago, when officials sought asset valuations for the 25% of national assets offered for privatisation.

As multi-national companies with broad geographic foot-prints, the destiny of BMW and FIAT are of course not wholly predetermined by the national economic outlook, though it must be noted that beside Renault there are perhaps no other volume auto-manufacturers whose fortunes are as heavily dictated by domestic sales.

At 'surface reading' though BMW and FIAT fortunes look to be divergent.

Like VW and Daimler, whilst it continues to grow internationally, BMW has the innate 'feudal-technocratic' incentive to remain an intrinsic part of the German economy, one which even under possible EU collapse will feed-into and feed-from the global economy.

FIAT must attune its products to a deflating Italy whilst simultaneously trying to maintain and grow its Latin American position. FIAT's Latin-link was undoubtedly part of Washington's reason to approve the FIAT-Chrysler deal, but as FIAT-Chrysler the company will be dependent upon Washington largesse – in the form of QE3 or new incentive schemes – to maintain and its US sales base.

The truly interesting note to consider was that China's Premier visited the UK, Germany & Hungary, effectively discounting Italy and the periphery; though China has offered the idea of support if necessary.

This then leaves the US to effectively help to prop-up Italy, by feeding its heavily pressured debt markets with a possibly unavoidable QE3 that would also help Ireland (given a reading between the lines of Obama's speech in Ireland.

Thus, today Northern Europe ostensibly looks East.
Whilst Southern Europe and the 'periphery' looks West.

Not quite the ideological divide historically seen between the Germanic tribes and Roman Empire, but apparent nonetheless.

This divide sets out the possibility of another notional route; one which Sarkozy 'interestingly' predicated as a Mediterranean economic bloc. The 'EU periphery' to coalesce with those newly re-formed countries that constitute the the 'Arab Spring'.

Leaderships of the 'junk-status' countries then have a trio of options, each progression path with numerous pros and cons. But whichever path is chosen the reality is that their countries cannot avoid the task of restructuring to make sense relative to a new economic bloc order and that inside a new global order.

The German-led route would involve broad-brush industrial planning by which Greece, Italy etc would essentially subsume themselves, but in return gain critical FDI and technology orientated projects which would vitally enhance both their commercial platform (especially if tied to privatised industries) and boost educational change.

The American-led route offers liquidity made available from continued Federal Reserve borrowing, yet the necessary privatisation and de-leveraging path would be more quickly initiated, longer ran (to extract deep value) and arguably harder felt, since such countries would have to follow in the train of the US which itself is on its own mighty devaluation path. This might require that resurrected 'old' currencies be informally tied to the the US$, with those countries of true concern directly pegged, so as to provide Washington with FDI and import good pricing assurances.

The Med-Bloc-led route offers the concept of a newly created world, one in which the 'EU periphery' could act as the lead instigators. But the massive cost-base chasm that exist between old-Europe and new-MENA would need to be leveled as soon as possible to ensure political harmony, which would require a quick and hard de-leveraging process that would generate the spectre of 'suffering' Christians compared to 'up-lifted' Muslims; this then creating social angst. Moreover, the argument that the periphery could re-run an EU type project for themselves whilst also containing their own national woes appears feeble; with additionally few major corporations akin to FIAT, Santander etc to assist in its development.

[NB MENA's economic development then seems more likely through Northern European &/or full EU, UK and Scandinavian involvement]

As important component parts of their respective homeland economies, BMW and FIAT presently face very different futures. These scenarios and their fortunes result from the innate differences between the respective 'far horizon technical planning' and 'mid-horizon financial planning' cultures, intrinsic to country and company.

Yet despite the differences, they will continue to act as the 'connecting rods' between their own 'mechanical engines' and the broader 'economic engine'. FIAT's supercharged 'twin-air' unit is a good metaphor for the listing of its Cars and Industrials divisions. And BMW's mini-bloc straight- six could be an allegory of Europe's 'senior 6' members to provide a balanced delivery of soft-power in order to drive the EU-project straight and true.