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Daimler, Renault to team up

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Daimler, Renault to team up

Limited partnership offers companies chance to share small-, luxury-car specialties

Christine Tierney / The Detroit News

The Renault-Nissan Alliance was rebuffed in 2006 when it reached out to General Motors, and a year later, Germany's Daimler AG wrote a big check to break off its relationship with Chrysler. But the European automakers haven't given up on partnerships.

Now they're ready to try again -- with each other.

Dieter Zetsche, chief executive of Stuttgart-based Daimler, and Carlos Ghosn, CEO of Renault SA and Nissan Motor Co., are expected to announce the start of a partnership as early as Wednesday, according to sources familiar with the talks.

The deal is expected to entail small cross-shareholdings as a sign of the companies' mutual commitment, and joint projects on models and components.

Renault-Nissan and Daimler both stand to gain because there's little overlap between their product lines and areas of expertise, analysts say.

A partnership could help to resolve longstanding challenges at both Renault-Nissan and Daimler, they say.

Paris-based Renault specializes in small cars but isn't competitive in the large and luxury car segments. It also is struggling with excess capacity at some of its European assembly plants.

Daimler, on the other hand, has one of the world's most renowned luxury brands in Mercedes-Benz, but it can't produce small cars profitably. It has been searching for a manufacturer to help it reduce small car production costs, and for a time found a partner in Japan's Mitsubishi Motors Corp.

The companies are likely to seal the deal with equity stakes -- but not as substantial as those that bind Renault and Nissan, partners since 1999. Renault holds a controlling 44 percent in Nissan, which has a 15 percent holding in Renault.

The small stakes envisaged by Daimler and Renault reflect the need to conserve cash in this difficult environment, as well as the early stage of their relationship.

"Is this a wedding like Daimler-Chrysler? No, I think it's a lot more hands-off," said Michael Robinet, vice president of global forecasting at CSM Worldwide in Northville. "It's an association of two companies that offer complementary possibilities down the road."

In addition to pooling their complementary expertise in various passenger car segments, they stand to benefit from higher economies of scale in components and engines, too.

Gaetan Toulemonde, a Paris-based analyst at Deutsche Bank, said Renault and Daimler also may consolidate their heavy-truck holdings. Renault could earn some cash by selling its 20 percent stake in Swedish truck maker AB Volvo to Daimler.

For Daimler, the world's biggest heavy truck maker, "the 20 percent stake in Volvo from Renault would bring economies of scale," Toulemonde said.

A Daimler-Renault tie-up is bound to put pressure on other players in Europe, such as BMW, PSA Peugeot Citroën and Fiat SpA, Robinet said. Together, Daimler, Renault and Nissan produce 7.2 million cars and light trucks annually.

In an industry filled with broken relationships, analysts are skeptical but encouraged by Renault's smooth management of its alliances. The French company cooperates extensively with Nissan but only on projects benefiting both. Its acquisitions of Samsung in South Korea and Dacia in Romania were successful.

The relationship with Daimler is expected to be looser. "It's all about where the relationship shouldn't go, as well as where it should go," Robinet said.

"In the end, understanding the boundaries is just as important as the association itself."

From The Detroit News: http://www.detnews.com/article/20100406/AUTO01/4060323/1148/auto01/Daimler--Renault-to-team-up#ixzz0kK1GaoRo

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