Text: Jared Solomon

It was 1886, and a man by the name of Karl Benz had just created the worlds’ very first four-wheeled internal combustion automobile. That same year, two more Germans, Gottlieb Daimler and Wilhelm Maybach, had fashioned the first four-wheel, four-stroke automobile. Many similar inventions and technologies followed soon after, and eventually the automobile industry was brought to life.

In 1926, Benz & Company decided to join forces with Daimler Motoren Gesellschaft AG, creating an alliance which led to the birth of the most successful motor company at the time, Daimler-Benz AG, and for decades the German force continued to revolutionize the auto industry and lead the global car market.

In 1998, Daimler-Benz AG bought the American automobile manufacturer, Chrysler Corporation, and formed DaimlerChrysler AG. The new buy-out was supposed to be a match made in heaven, but it turned out to be nothing more than money burnt and value destroyed. Realising its inevitable disaster, Chrysler was dropped in 2007 – giving way to the new (original) company re-named Daimler AG.

Daimler AG realized that the merger with Chrysler was flawed, but took it as a learning experience. And so on April 7th 2010, Daimler officially partnered with the Renault-Nissan Alliance, creating a new brotherhood between these leading auto companies. But, they aren’t the first multi-national auto manufacturers to merge or collaborate – many car makers have partnered each other in the recent past to shield their assets from the impact of cyclical changes in the global economy.

In 1999, shortly after its privatization, the French major, Renault, bought a 44.4% stake in Nissan, and subsequently the Japanese firm purchased a 15% non-voting stake in Renault. The success of the merger was overwhelming, and in 2005 the Renault–Nissan Alliance held 9.8% of the worldwide market. The Renault-Nissan Alliance was the world’s fourth largest automotive group, and in 2009 sales reached 6.1 million vehicles. Add that figure to the 1.9 million vehicles sold by Daimler last year, and you have one of the biggest and most valuable groups in the world. With their combined forces and powerful brands, the car makers from Germany, France and Japan are sure to shake things up in the global auto industry.

All parties have been secretly working for months to draw up plans to share products and technologies, and because of lessons learnt by Daimler AG through the failed Chrysler merger; this partnership will focus more on product programs and less on a merger of corporate cultures. In fact, the alliance between the auto giants is not a merger; it is a cooperation deal that involves small equity exchanges. Renault bought a 3.1% stake in Daimler AG, however, Renault willingly handed over 1.55% equity of its Daimler shares to Nissan in exchange for an additional 2% equity of Nissan. Simultaneously, Daimler AG acquired a 3.1% stake from Renault and a similar amount from Nissan.

Rather than focusing on ownership and corporate authority, the partnership will be based on sharing information and combining forces to gain strategic and competitive advantages over other global players. Daimler and the Renault-Nissan Alliance are combining common interests to form a promising foundation for a successful cooperation that is based on concrete project teamwork.

The auto makers will cooperate on the next-generation of Daimler’s Smart Fortwo microcar and Renault’s Twingo small car, which will also include electric versions of both models. The companies are very keen to work together to gain knowledge in the green car segment and realize a zero emission carbon footprint. The sharing and development of engines is also one of the main strategies. The companies will work together to diversify and improve respective powertrain portfolios. The engines from the Renault-Nissan stable are to be used in the new Smart and can be adapted to suit Mercedes-Benz characteristics as well. The sharing of engines will occur from both sides – for example, from Daimler to Infiniti (Nissan’s luxury brand), which will include both petrol and diesel engines, and from Renault-Nissan to Smart, as well as a diesel engine and transmission for the Mercedes-Benz Vito light van.

Consequently, the partnership will also focus on collaboration in the field of light commercial vehicles, as well as achieving additional synergies such as common purchasing opportunities. The exchange of operational benchmarks and best practices will also be implemented into the corporate strategies wherever possible. The partnership will thus affect product plans, factories, suppliers, retailers and investments in technology for brands, but the new arrangements will not change the individual brand identities or the retail networks for them.

It is the intention of both groups to create a long-term framework to work closely on future areas of cooperation between Renault, Nissan and Daimler. All three companies are the original pioneers of the industry and have been around since the creation of cars. Their experience and superior engineering skills will continue to revolutionize the auto world for many years to come. If the brotherhood falls, it would be the result of failed execution, which is unlikely to happen since the alliance will be specifically project focused. With the green movement on the rise, and the need for innovative technology, these historic companies could benefit themselves tremendously by cooperating with each other and learning – not to mention widening their respective cost bases. As Carlos Ghosn said, the Renault-Nissan Alliance already knows how to work successfully in collaborative partnerships, and this experience is extremely valuable in today’s, and even more so, in tomorrow’s global auto industry.