MercoPress. South Atlantic News Agency

Daimler, Renault, Nissan seal alliance to lower costs, expand in European market

The crux of the deal is sharing components

German auto major Daimler-Benz and Franco-Japanese alliance Renault-Nissan on Wednesday announced a three-way tie-up, including equity swaps, for co-operation in development of small cars and light commercial vehicles.

in turn will take 3.1% of new Renault shares, and 3.1 of existing Nissan shares. Renault-Nissan and Daimler estimate they will gain €2 billion each in the next five years in cost savings and additional sales.

This deal between Daimler and the Renault-Nissan heralds a new kind of partnership among automakers seeking to survive Europe's challenging car market.

At the crux of the deal is an agreement on sharing components: Renault-Nissan will provide power-trains for Daimler's smart brand of micro cars, Renault's Twingo (and their electric versions), and the Mercedes-Benz range of premium compact cars.

Daimler will also provide petrol and diesel engines for the Infiniti, the luxury division of Nissan, while collaboration will also take place in the area of light commercial vehicles.

The strategy of one automaker acting as a supplier for another is not new — Peugeot Citroen has been acting as an engine supplier to BMW, but the extent of cooperation seen in this latest deal is unprecedented.

“This is a very project-orientated, very restricted type of cooperation, where one acts as a supplier to another,” said Mr Christoph Stuermer, a Director of the automotive group at IHS Global Insight.
Daimler-Benz has struggled with previous attempts at alliances: she was forced to abandon its control of Mitsubishi back in 2005, while its tie-up with Chrysler proved equally disastrous.

Will the new alliance prove successful? The highly-specific nature may increase chances of success. “It is an attempt to avoid the difficulties of a full inter-cultural merger and restricts the cooperation to the traditional mould of supplier-buyer relations,” said Mr Stuermer.