Posted by: David Welch on April 7, 2010
When Renault-Nissan CEO Carlos Ghosn first formed the Franco-Japanese car alliance, he joked at the 1999 Tokyo Motor Show about serving sushi and Chardonnay. Well, let’s slather some spatzle on the side, shall we? Renault-Nissan and Daimler AG will form a global automotive triumvirate by swapping each other 3.1% stakes in each other. It’s not a merger, mind you, but an alliance strung together with only a small equity stake.
If it works, it will be through Ghosn’s force of will. Automotive alliances and mergers have a poor record, to say the least. This is especially true when Daimler is involved. The company’s acquisition of Chrysler ended in failure. Partnerships with Hyundai and Mitsubishi didn’t bear much fruit either.
In this case, I’ll give Ghosn his due. The Renault-Nissan alliance is one example of an alliance that has worked. Both companies have shared engines, parts and vehicle platforms to expand their offerings faster and more cheaply than they otherwise might have done. Ghosn had the advantage of running both companies. He won’t get into an alliance without knowing that there are some real projects in the works.
On a call today with American journlaists, Daimler CEO Dieter Zetsche, who was CEO of Chrysler during the failed merger, said this deal is different because the three companies have already hammered out specific projects to work on. “In the past,” he said, “we decided on an alliance and then later decided what to work on. We have specific concrete projects we are working on.”
By combining car technology and manufacturing capabilities, the two companies will jointly develop future compacts and the Smart and Renault Twingo subcompacts, as well as other small cars. A four-passenger Smart is said to be in the works. The jointly-developed small cars are supposed to be ready for sale by 2013. Daimler’s Mercedes luxury unit can also help Nissan develop luxury cars for Infiniti. On a conference call with journalists, Ghosn said a 4-liter Mercedes engine could find its way into Infiniti cars in the U.S. Zetsche said the two companies will also work to develop electric cars together. The two companies also plan to build cars in each other’s U.S. plants. Nissan has two large factories in Smyrna, Tenn. and Canton, Miss. Mercedes has an assembly plant in Alabama.
I’m not a fan of auto alliances and mergers. Even small ventures like Nummi—the soon-to-be-closed plant in Fremont, Calif., that General Motors and Toyota ran for decades gave more benefit to the Japanese giant than it did to GM. In recent years, Toyota used much more of the production. In this case, I think the deal will yield some dividends. Ghosn won’t have it any other way. Just don’t serve any raw bratwurst, please.