Renault-Nissan and Daimler could work. Ghosn will insist

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.

Reader Comments

JT

April 7, 2010 10:33 AM

"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."

That's because GM and the unions decided their way was best instead of learning and growing from the opportunity with Toyota.

hhj

April 7, 2010 12:06 PM

"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"

haha, now I know I should stay away from Businessweek

Bob Hamilton

April 7, 2010 12:21 PM

Zetsche: “In the past,” he said, “we decided on an alliance and then later decided what to work on". It seems to me that this CEO has just admitted to a rookie mistake that would normally get a junior employee fired!

blowfish

April 7, 2010 1:56 PM

Sometimes when u dont have a lot of time and extra cash to throw away in R&D, to do your own R&D can be very costly and missed opportunity. Only options left is try to join hands with your competitor and start trading some of your non-core secrets.

It could be win-win.

Daimler lacking the expertise on making small cars, I mean efficiently and cheaply. Daimler didnt sold Smart car early enuf in USA did cost her a lot of $$ too.
The Joint sharing is like Rolex team with Timex to make a watch to sell at the opposite price spectrum.
The other option is stick to your knitting, only selling high end or low end is not going to make it in this day and age. Almost trying to be all things to all people.
Every manufacturer has its own wagen surrounded by Indigenous people.
OT

Some rumours about Maybach has a new model to be shown in Middle Kingdom.
I am not so sure if thats a wise move at all.
Merc watching from previous track record building Luxury cars was never her Forte at all. Mechanically was far advanced than many most other manufacturers. Nowadays with fancy , smancy Electronic gizmos, it kind of her achilles tendon.

The good old 600 Pullman, it sold enough but never a threat to RR.
U think Maybach can be a threat or even take a small chunk of the pie?
Sure Maybach can take a small chunk of the pie but kind of retreat to the "also ran ran" status.
To let her go on make as much sense as finding another suitor for Hummer.
Can Daimler be as money no object as Vee Dub (VW) supports Bugattis?

VW is regrouping her illfated Phaeton from USA and assaulting Middle Kingdom again.

Frank A NYC

April 7, 2010 2:30 PM

I see the benefits for Mercedes, I don't see what R/N get out of this other than purchasing discounts.

Amara Moosa

April 8, 2010 2:01 PM

We all know how corporate alliances end(usually bad). Though both parties are claiming this alliance would be different, I still have my doubts. I am prettry sure that, one of the firms have motives different than the other and only time will tell. Daimler is bigger than Renault-Nissan and there future goals will change. This is story that needs further update.

Interconnect

April 14, 2010 6:54 AM

Nano a perfect convergence/integration of minds, technologies which worked. Outsourcing from Bosch, EU, North America, Asia and the car is the best and the cheapest car. Nations, people benefit, and companies prosper in terms of other M&A by Ta;ta Group which came to them to make lot of money. People friendly machines for people to commute Daimler has excellence in fuel cell which can help the world overcome the environment. Why not share it with China, the sub-continent of Indo-Pak and make an Indo-Pak, China car with the EU coming in with technologies as with Nano.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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