Renault-Nissan, Daimler in small-car alliance

[April 20, 2010]  BRUSSELS (AP) -- Carmakers Renault SA, Nissan Motor Co. and Daimler AG have entered a wide-ranging alliance to help each other gain ground in the growing but fiercely competitive market for small, fuel-efficient vehicles.

The partnership comes amid a painful industrywide slump and will focus on sharing the development and production of chassis and engines. The move will be sealed with a cross-shareholding giving the three companies a small, symbolic stake in each other.

Speaking at a joint news conference Wednesday in Brussels, Daimler boss Dieter Zetsche cited rising demand for small cars as a key driver behind the alliance.

"Since the small and compact vehicle segment is so highly competitive and price-sensitive we also need to have the right cost structure," Zetsche said.

Government cash-for-clunkers programs and customer concerns over fluctuating fuel prices have helped push sales of smaller cars over heavier gas guzzlers and luxury models.

Renault Chief Executive Carlos Ghosn said European Union restrictions on cars' average carbon dioxide emissions -- achieved by lower fuel consumption -- was also a factor in the deal. Companies could face fines if they don't gradually reduce CO2 output after 2012.

Small cars are less profitable and sharing parts and platforms allows the companies to build them more cheaply.

The executives estimated that the Renault-Nissan alliance and Daimler would each achieve euro2 billion ($2.7 billion) in cost savings and additional sales from the new alliance over the first five years.

Renault's Ghosn, who also heads Japan's Nissan, said the alliance was just the latest step in a wave of industry tie-ups for Renault and others.

"The name of the game is to be present everywhere," Ghosn said, "so we are going to move for more and more consolidation."

"Do not be surprised if we continue to add scale," he said.

Renault and Nissan will each take on a 1.55 percent stake in Daimler, which in turn will take a 3.1 percent stake in each of the other two.

The move will add to Renault and Nissan's existing 11-year-old alliance, that has made it the world's fourth largest automotive group with sales of 6.1 million vehicles last year. They share development costs and Renault owns a 44 percent stake in Nissan.

Cooperation will include developing a common chassis for two of the automakers' small cars, Daimler's Smart Fortwo and Renault's Twingo. The partnership will also extend to sharing gasoline and diesel engines, with Daimler's Mercedes-Benz using Renault-Nissan engines for its future lineup of premium compact cars, and Nissan's Infiniti using 4- and 6- cylinder engines from Daimler, the companies said.

"Right away we are strengthening our competitiveness in the small and compact car segment and are reducing our CO2 footprint -- both on a long-term basis," Zetsche said.

Zetsche said the partners "will work together to examine further possible areas of cooperation" beyond those detailed Wednesday.

Ghosn said Renault and Nissan's cooperation with Daimler could also eventually see them share technology for electric cars and batteries. He has been a vocal proponent of electric vehicles and predicts the segment will grow to about 10 percent of global sales by 2020.

Other automakers -- including Chrysler, Mitsubishi and Ford -- are also touting plans for cars with electric motors as the industry seeks to overcome the current sales slump and meet tougher environmental and carbon emission standards.

Daimler's boss ruled out any possibility that the deal with Renault and Nissan could evolve into a full merger like the stormy marriage it had with Chrysler from 1998 to 2007.

"At this point in time there is no thought of going further," Zetsche said.

Ghosn also said that Renault and Nissan intend to keep its brands and identity separate from partners, including Daimler.

The Wednesday deal is the car makers' response to a sharp sales downturn as recession-hit consumers shunned spending on big-ticket items. Last year Renault made its first annual loss since it was privatized 13 years ago. It predicts another tough year in 2010.

Daimler, which relies heavily on costly luxury cars likes its Mercedes, lost euro2.6 billion last year after taking charges including euro294 million to settle its exit from a failed alliance with Chrysler LLC

Renault shares were trading down 1.75 percent at euro36.22 in Paris late morning trading. Daimler shares were down 0.2 percent at euro35.44.

[Associated Press; By GREG KELLER]

Associated Press Business Writer Aoife White contributed to this report.

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