(FORTUNE Magazine) – Remember The Reckoning, David Halberstam's weighty 1986 bestseller that celebrated the success of Nissan and other Japanese automakers? Halberstam attributed their rise to cultural spirit, fierce domestic competition, and a "demonic need for excellence." In retrospect, he should have added cheap money, closed markets, and a rigged economy. Despite all those advantages, however, Nissan has repeatedly faltered, losing money year after year and accumulating $24 billion in debt. Now the company has essentially put itself up for sale by saying it will accept a capital infusion from a foreign automaker. It identified its preferred partners as Ford Motor, DaimlerChrysler, and France's Renault.

Nissan may have stumbled before, but its timing here is impeccable. The global auto industry has become infected with a virulent case of merger madness in the wake of the linkup between Daimler-Benz and Chrysler last year. Everyone is worried that the consolidation predicted for 20 years has finally begun, and no one wants to be left behind. Ford CEO Jacques Nasser says he's interested in buying another automaker as long as the price is right, while DaimlerChrylser chairman Robert Eaton predicts that two major European auto companies will join forces "in the next 90 days." In addition to Nissan and its suitors, Honda, BMW, Fiat, and Volvo have been the subject of merger rumors.

It all sounds plausible. Other industries--oil, banking, telecommunications--are consolidating, and autos would merely be accelerating a process that began 65 years ago. But on second look, the urge to merge looks more hysterical than rational. "I do not think there is any logical, economic, or strategic reason why only five to ten giant automakers need to survive in the world," says Takahiro Fujimoto, an economics professor at Tokyo University and a member of MIT's International Motor Vehicle Program.

Nissan is a case in point. At first glance, it makes an attractive partner because it provides an opening into the growth markets of mainland Asia. But putting a Japanese company together with a Western one would create a welter of cultural and linguistic problems that could make hash of any attempt at cooperation. Even after installing its own top executive team, Ford has needed several years to straighten out Mazda, and Nissan would be a much harder case. It is larger, older, more bureaucratic, and infinitely more complex, with dozens of subsidiaries whose finances are intertwined with the parent company's.

Four arguments are usually put forth to justify the industry's supposedly inevitable consolidation into (pick a number) six, eight, or ten global megacompanies. Let's take them one at a time:

"There are too many companies": DaimlerChrysler's Eaton likes to observe that of the 40 auto companies in the world today, only about ten make money and perhaps just half of those earn back their cost of capital. Are all those companies needed? Probably not. If the U.S. has three automakers, why does Japan need nine? But auto companies are like cockroaches: they are hard to kill. Nobody wants to buy the weak ones, especially because many of them are in even worse straits than their annual reports suggest. Remember, national governments coddle carmakers because they provide jobs and reflect civic pride. You'll recall how the U.S. government guaranteed a $1.5 billion loan for Chrysler in 1980. Logically, France can't support both Renault and Peugeot/Citroen, two automakers whose product ranges and markets overlap, but they are important sources of employment, and France's government isn't about to let them fail.

"Merging can cure overcapacity": Excess production capability has become the industry's bogeyman, the all-purpose explanation for skimpy profit margins. But overcapacity has been a fact of life in the auto industry for decades. Except for unusual periods such as immediately after World War II, capacity has always exceeded utilization because auto companies want to meet demand during peak periods. Excess capacity has remained relatively steady at about 25% of total production capability, and mergers don't always reduce it; they often only put it under one roof instead of two.

"Size means success": Adding volume through mergers is a good way to spread research and engineering costs, but it ignores the advantages of agility and focus. Honda and BMW are only a fraction of General Motors' size, but that hasn't prevented them from handily outperforming the General for the past 20 years. Put two lumbering companies together, and you get one that runs worse, not better.

"Global equals growth": Despite their financial collapse, markets in Asia and Latin America are considered the Holy Grail because they contain millions of new customers. But there are other ways to reach those markets besides buying a local producer. Fiat has a strong presence in Latin America, while Mitsubishi is powerful in southeast Asia. By working out joint production and distribution agreements, the two companies could deploy their complementary strengths without the nuisance of a full-fledged merger.

The auto industry went on a merger binge in the late 1980s, with unhappy results. Saab has been a consistent money-loser since GM bought a half interest, and Jaguar cost Ford some $5 billion before it turned profitable. Chrysler bought and then sold Lamborghini and Maserati in quick succession.

This time the companies are bigger, but the prospects are no more promising, with one exception: Sweden's Volvo. Smaller even than BMW, it has neither the technical resources nor the brand power to remain successful for the long term. Ford is a frequently mentioned suitor, but the two companies overlap geographically and Volvo adds little to Ford's brand portfolio. A more likely partner is Italy's Fiat, which could benefit from Volvo's strength in northern Europe and the U.S. Something appears to be in the wind: According to the latest reports, both Ford and Fiat have made bids for Volvo. One question they'll have to answer: Can Swedes work better with Italians or Americans?