The world's luxury-car leaders are debating how big a company has to get to afford the new technologies their customers demand

When Daimler-Benz took over Chrysler three years ago, it argued that globalization demanded not just speed but also size. Selling dozens of models in every price range, the reasoning went, was the only way a car company could afford the huge investments necessary to incorporate the latest technologies. That meant that if you were a small independent, you would have to merge—or face the Darwinian consequences. So Daimler coupled with Chrysler, Renault bought Nissan, Ford scooped up Volvo, and everybody mused that it was just a matter of time before the biggies gobbled up BMW and Honda, and maybe even Porsche. Yet here we are in 2001, and the most successful players in the auto industry are ... BMW, Honda and Porsche. Jurgen Schrempp, the once-swaggering chairman of DaimlerChrysler, is praying that the billions of dollars in losses at Chrysler and Mitsubishi (in which he bought a ruling share last year) don't sink the entire company. Ford ceo Jacques Nasser has a collection of premium brands in his stable: Aston Martin, Jaguar, Land Rover and Volvo. But amid a weak economy, sales at Ford and GM are down some 15% this year, and even the luxury brands are under new pressure from smaller Japanese and German automakers. At BMW headquarters in Munich, you'd never know there was a downturn. First-quarter sales set records, and April sales soared 30% over last year's numbers. In North America, BMW overtook Mercedes for the first time. BMW executives have announced a plan to expand their selection to 76 models from 70. They expect to sell 200,000 units, up from 189,423 and to increase their share of the luxury-car market.