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Renault-Nissan, Daimler in small-car alliance

Updated: 2010-04-08 02:42
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Renault-Nissan, Daimler in small-car alliance

Dieter Zetsche (R), chief executive officer of German car manufacturer Daimler AG, shakes hands with Carlos Ghosn (L), chief executive officer of Renault-Nissan Alliance, before signing an agreement in Brussels April 7, 2010. Carmakers Renault SA , Nissan Motor Co and Daimler AG announced on Wednesday a strategic cooperation that includes a one-time exchange of minor stakes in each other. [Agencies] 

BRUSSELS - Will a mini Mercedes powered by a Renault-Nissan engine still command a luxury-brand premium?

Daimler AG is confident it will, as the German automaker teams up with France's Renault and Japan's Nissan to share parts and platforms and make more cost-efficient and competitive small cars, forming an automotive three-way alliance that they hope will help them ride out a sales slump.

The car makers aim to strip out billions of euros (dollars) in costs over the next five years by sharing parts and development costs, mainly in energy efficient compact cars such as the Renault Twingo and the Mercedes Smart car.

Renault-Nissan, Daimler in small-car alliance

Analysts say there is little risk that the cachet of Mercedes' flagship brand will take hit from the deal, as the parts sharing will be limited to the small car division.

The risk of brand contamination for Daimler's Mercedes is "practically zero," said Juergen Pieper, an analyst at Metzler Equities in Frankfurt, pointing to Volkswagen AG's stewardship of the high-priced Bentley brand.

"Bentley is practically 70 percent Audi, and do the people who spend euro200,000 for a Bentley think about that? No, I don't think so," he said. "It's really touching only small cars and this is not a sensitive part of the group."

Helmut Becker, an economist at Germany's IWK think tank said customers "probably won't notice much" in Daimler's smaller model ranges, the A-Class and B-Class.

"It remains a Daimler car ... there is no mixing-up in the product lineup, and it will happen under the hood," he said.

Top executives from Renault and Daimler also took pains to stress that their brands would keep their separate identities, even if the engines that power the cars start to look more and more alike.

"Each brand has its own identity and its own kind of products and its own cost and price level," Renault boss Carlos Ghosn said. "We need to keep each brand very different from the others."

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Ghosn said the companies had quizzed customers of Nissan's luxury brand Infiniti vehicles and Mercedes and believed that sharing engines would not cannibalize sales of either.

"People buying Infiniti or Daimler, they don't cross-shop between the two brands," he said. Infiniti buyers show interest in Lexus, Audi and BMW "but very little in Mercedes. We came to the conclusion that Mercedes collaborating with Infiniti will not be hurting each other," he said.

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.

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