Daimler, Renault boards approve global car alliance

ERJ staff report (AN)

Daimler AG's and Renault SA's boards approved plans for a global alliance focusing on sharing small- car technologies and development costs, according to people familiar with the matter.

A deal involving Renault and Japanese partner Nissan Motor Co. swapping stakes with Daimler was announced this morning. Daimler CEO Dieter Zetsche and Renault-Nissan's Carlos Ghosn attended a joint press conference in Brussels this morning. In a joijnt statement they said Daimler will get 3.1 percent of Renault's newly issued shares and 3.1 percent of existing Nissan shares from Renault. Renault will get 3.1 percent of Daimler, exchanging half of that for 2 percent of Nissan's shares. As a result, Renault and Nissan will each hold 1.55 percent of Daimler, they said in a statement.

Under the deal the companies will remain separate, but can share technology and development costs.

Automakers are under pressure to cooperate as sales remain depressed in the recession's aftermath while the manufacturers spend more on technology to meet tighter exhaust-emissions standards. An alliance of Daimler and Renault-Nissan would follow a tie-up between Volkswagen AG and Suzuki Motor Corp. earlier in 2010 and Fiat SpA's taking a stake in Chrysler Group LLC last year.

“The cooperation is really being forced by the European Union,” said Arndt Ellinghorst, an automotive analyst in London at Credit Suisse Group AG. “Carbon dioxide emissions targets can't be reached without selling a significant amount of small cars.”

Cross-shareholdings

The French government, which holds a 15 percent stake in Renault, is “backing the partnership to enable a greater alliance,” French Industry Minister Christian Estrosi told lawmakers today. The minister told reporters in Paris earlier today that France will remain “vigilant” over jobs at Renault, the country's second-largest carmaker.

Renault, Nissan and Daimler plan to share development costs for products including compact models, luxury cars and commercial vehicles. The companies will also swap gasoline and diesel engine knowhow as well as hybrid, electric and fuel-cell technology, the people said Monday.

Smart, Twingo

Daimler's Smart minicar and Renault's Twingo model may share key components in the future, while Daimler's Mercedes- Benz division may supply engines and transmissions to Nissan's Infiniti luxury brand, the people said. The three companies expect to save “billions of euros” by sharing development costs as part of the alliance, the people said Monday.

“The cooperation would benefit both players, but the profit and savings impact may be relatively better for Renault, because of the volumes it brings compared to Daimler,” Ellinghorst said. “For Daimler, it's an enabling strategy that allows them to keep selling big cars in Europe.”

A cross-shareholding underpins Renault and Nissan's existing alliance. Renault owns 44 percent of Nissan, which in turn owns 15 percent of the French carmaker. Renault bought a controlling stake in Nissan in 1999 when the Japanese automaker was nearing bankruptcy.

Daimler is considering using a 3.5 percent holding in its own stock to fund the potential partnership, people familiar with the situation said on March 25. The German manufacturer has been seeking a partner to help double its lineup of compact Mercedes-Benz models to four and add a larger version of the two-person Smart. Daimler and Renault said in December that they're in talks.

From Automotive News (A Crain publication)

From press release from Renault