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Alliance sparks big plans

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Alliance sparks big plans

Detroit-burned Daimler seeks better product marriage with Renault and Nissan

Lindsay Chappell

and Hans Greimel

Automotive News -- April 12, 2010 - 12:01 am ET

The 1998 combination of Daimler-Benz AG and Chrysler Corp., touted as an effort to create a common, cost-efficient global automaker, eventually was left a shambles.

How complex was the union? In the first year a committee was formed to hammer out an agreement on what dimensions the merged company's business cards should be.

Now Daimler is trying again. And its new partnership with Renault and Nissan, it says, means more product programs and less corporate merger.

Renault will build a Smart model. Mercedes-Benz engines will power Infiniti vehicles.

Daimler needs to boost its small-car operations in response to regulatory pressure to cut carbon-dioxide emissions. Renault wants to improve capacity utilization and coverage of fixed costs at its plants in France, where it is politically difficult to fire workers.

Months of planning

Last week's move by Daimler AG, Nissan Motor Co. and Renault SA to exchange a token percent of stock already has produced a notebook of proposals that could be far-reaching. The pact could affect product plans, factories, suppliers, retailers and investments in technology for an undetermined number of brands in many world markets.

During a press conference Wednesday, April 7, with Carlos Ghosn, Renault and Nissan's energetic and fast-talking CEO, and Dieter Zetsche, Daimler's soft-spoken engineer chairman, the partners revealed that they have been secretly working for months to lay out plans to share products and technologies.

Zetsche and Ghosn want 4 billion euros ($5.33 billion) in combined savings and additional revenue from the pact by 2015 by sharing development costs for small cars and engines.

"You're going to see Renault engines in some Daimler cars, Nissan engines in some Daimler cars," Ghosn said. "You're going to see Daimler engines in Infiniti cars. That's very concrete."

Zetsche acknowledged that Daimler's failed takeover of Chrysler was a learning experience. It was capital-oriented, as opposed to product-oriented, he said.

'Concrete projects'

This time, he added, the small stock ownership exchange is symbolic. Nissan and Renault each purchased just 1.55 percent of Daimler stock. Daimler acquired a combined 3.1 percent in Renault and Nissan.

"Compared to our former cooperation or merger," Zetsche said of the Chrysler deal, "we have these very specific concrete projects on hand, where already teams are working, and where we know both sides will benefit.

"In the past, we first decided about an alliance and then started to look at what we could do together. And after nine years of working together with Detroit, we had less on our hands than what we have here at the start.

"Here, we have mostly content and very little symbol on top of it. On the other hand, we had mostly capital integration and almost no content."

Renault and Nissan have an alliance dating back 11 years that is often termed one of the auto industry's few successful cross-shareholdings. Today, the French automaker holds a 44.3 percent stake in its Japanese partner, while Nissan has a 15 percent stake in Renault.

Renault, France's second-biggest carmaker, bought a controlling stake in Nissan in 1999 when the Japanese automaker was nearing bankruptcy.

For historical perspective on the new partnership, Renault and Nissan tried to set up an alliance with General Motors in 2006 to save costs by sharing production, development and purchasing. Talks between Ghosn and then-GM CEO Rick Wagoner ended without an agreement. Haggling over savings "was one of the reasons that our discussions with GM failed," Ghosn said.

He said he is still on the hunt for more partners to increase the scale of the Renault-Nissan alliance. The Daimler deal doesn't preclude similar tie-ups with other automakers, he said.

Daimler, Renault and Nissan were hesitant to reveal the full extent of the plans they are discussing. But what they did reveal is vast in ambition:

-- Daimler's Smart brand will be resuscitated with new products jointly developed with Nissan and Renault for the 2013 model year and beyond. U.S. retailers will see a next-generation Smart ForTwo two-seater. There also will be a Renault-built four-seat Smart -- including an electric version -- developed for Europe, but that may go to U.S. retailers as well.

-- The next Renault Twingo will be built off the same architecture, although not for the U.S. market. The Smart version will retain its current rear-drivetrain design.

-- The partnership will supply Mercedes' next-generation B-class front-wheel-drive family car. But Zetsche said the joint development will mean reduced costs that could make it feasible to begin selling the B car at U.S. dealerships.

-- Renault-Nissan will supply Daimler with three- and four-cylinder gasoline and diesel engines.

-- Nissan could manufacture a light-commercial vehicle for Daimler in the United States -- possibly the next Sprinter van.

-- Nissan and Mercedes could share engine-manufacturing capacity in the United States. Although the announcement is not specific, Mercedes has suffered from currency exchange rates as it imports engines for its Alabama production of SUVs and crossovers. Mercedes also is preparing to launch production of its C-class car in Alabama. That would require an imported engine.

-- The Infiniti G series will obtain a high-output Mercedes-Benz four-cylinder engine that is currently not sold in any of Mercedes' U.S. products. Such downsized engines are a hot button for automakers now, as they look for more horsepower from smaller engines in order to meet tougher corporate average fuel economy requirements for the 2016 model year.

-- Infiniti also will get a Mercedes diesel engine that will be used in non-U.S. markets. Diesel engines are critical components for luxury sales in Europe, where Infiniti is still a new player.

-- Nissan, Renault and Daimler will develop future engines jointly.

-- The partners will work together on new electric cars, as well as batteries, motors and inverters.

-- Daimler and the Renault-Nissan Purchasing Organization are likely to undertake some joint North American component purchasing.

-- The partners said the new arrangements will not change the companies' retail networks. Daimler will not use Nissan dealers to sell Smart, and the Penske Automotive Group will continue to control distribution of the Smart brand here.

Diana T. Kurylko and Bloomberg contributed to this report


Highlights of the Daimler, Renault and Nissan partnership's plans


• New Renault-built 4-seat car for Smart

• Next-generation fwd Mercedes-Benz B class that could be sold in North America

• Possible Nissan-built light-commercial vehicle for Daimler in the United States


• Renault-Nissan-supplied gasoline and diesel engines for Daimler

• Shared engine manufacturing for Nissan and Mercedes in the United States

• High-output Mercedes-Benz 4-cylinder for Infiniti G series

• Mercedes diesel engine for Infiniti

• Nissan, Renault and Daimler will develop future engines jointly

Electric cars

• Development of electric cars, as well as their batteries, motors and inverters


• Joint North American component purchasing among Daimler, Renault and Nissan

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