Following a year of intensive high-level talks and secretive, behind the scenes strategy meetings, Daimler AG and Renault SA have agreed on plans that will see their car-making divisions–Mercedes-Benz, Smart, Renault and Nissan–share resources on a wide range of products.
The move signals more consolidation within the European automotive industry. Daimler chairman Dieter Zetsche and Renault president Carlos Ghosn have set out three primary areas of cooperation that will see the carmakers share small-car and light-commercial-vehicle platforms, small gasoline and diesel engines, and electric drive systems. The carmakers will also have joint component, logistical and production programs, all aimed at netting what one source has described to AutoWeek as billions of euros in annual savings.
Daimler and Renault also will enter into an equity swap, likely to be about 3 percent for each company. The common shareholding is aimed at binding each carmaker to an agreement that will allow further expansion of cooperation between the two beyond the initial projects.
Insiders from Renault’s Paris headquarters have confirmed to AutoWeek that Zetsche and Ghosn are set to officially announce the tie-up ahead of Daimler’s annual shareholder meeting in Berlin, Germany, on April 14.
Up to 120 senior managers from Daimler and Renault have been involved in the talks. Although Nissan’s role in the sharing venture has been unclear, Tokyo-based officials from Nissan say they have been actively involved in creating the framework for the new deal.
BMW talks broke down
Discussions on a similar collaboration between Zetsche and BMW boss Norbert Reithofer broke down in early 2009 because of crucial differences in engineering philosophy on small cars and engines, according to AutoWeek sources. Renault sources familiar with the cooperation with Daimler now expect BMW to seek closer working ties with French carmaker PSA, parent company of Peugeot and Citroen.
“We have talked to just about everyone in recent years, but over time it became apparent that Renault provided the best fit both in terms of operations and business culture,” said a Daimler manager. “The various agreements … will provide each company with dramatic improvements in production volumes and overall scale for small cars and light commercial vehicles–something that is vitally important in today’s car-making business.”
Meanwhile, insiders at Nissan in Japan described the cooperation as “definite alliance,” adding, “It will be signed as an alliance deal.”
Project Edison provides new Smart cars
A key program for the Daimler-Renault venture is Project Edison–a new small-car initiative centered on the platform for the third-generation Smart ForTwo. A longer, extended wheelbase, version of the platform will be used for a successor to the Smart ForFour sedan, which was canceled in 2006 because of slow sales. Sources tell AutoWeek that the new ForFour will use a rear-engine/rear-drive layout. That’s a change from the conventional front-engine, front-wheel-drive architecture used in the first-generation model developed with Mitsubishi.
The steel-based unibody structure of Project Edison, now undergoing development at Mercedes-Benz’s engineering headquarters in Sindelfingen, Germany, uses the same space-saving rear-engine layout and exposed Tridion safety cell as today’s second-generation ForTwo–features considered unique selling points for the struggling Smart brand. But the platform has been extensively re-engineered for greater crash protection, improved packaging and weight savings.
In addition to the Renault deal, Mercedes-Benz is studying building a new high-tech small car to rival the upcoming BMW Mega City Vehicle. The effort is named Project 50. Insiders describe the car as having the dimensions of the original Mercedes-Benz A-class, about 138 inches long, with extensive use of carbon fiber and an electric drivetrain. It could use the rear-engine/rear-wheel-drive platform from the Project Edison Smart ForFour.
Edison spawns new Renaults, maybe Nissans
Renault will use the Project Edison platform for a new two-seat city car modeled on the Twizzy concept car shown at the 2009 Frankfurt auto show, as well as the third-generation Twingo. The new Twingo is set to be built alongside a new Smart ForFour at Renault’s plant in Novo Mesto, Slovenia.
Although not yet part of the cooperation agreement, Renault is investigating the possibility of building a Nissan derivative of the two-seat city car, and perhaps a Renault version of the four-door Project Edison car at Samsung’s plant in Busan, South Korea.
“Korea is a great place to build cars. It shouldn’t be ruled out that we could one day build small cars there for world markets,” a Nissan insider told AutoWeek at this week’s New York auto show.
Together, Daimler and Renault expect combined production of more than 350,000 units a year of Project Edison vehicles–nearly triple the average 120,000 units a year Daimler has achieved with the first two generations of the Smart car.
“The future ForTwo was never going to be hugely profitable at the sales levels it has established in recent years,” a high-ranking Mercedes-Benz insider told AutoWeek. “Even with the addition of a mechanically similar ForFour off a lengthened version of the same platform, the long-term returns for Smart would have been marginal at best. The additional production volumes and increased economies of scale brought on by the cooperation with Renault will ensure solid profitability throughout the life cycles of each model at the sales levels projected.”
In addition to gasoline and diesel engines, the Project Edison program calls for an electric drive system to be shared between Daimler and Renault. It will draw on the electric driveline technology found in the soon-to-be-launched Smart ED, combined with Chinese-sourced lithium-ion batteries from BYD, with which Daimler recently signed a cooperation agreement.
New four-cylinder gasoline, diesel engines
The second part of the alliance will see Daimler and Renault jointly develop a new range of turbocharged four-cylinder direct-injection gasoline and common-rail diesel engines for use in Mercedes-Benz, Smart, Renault and Nissan models.
Set to range in capacity from 1.2 liters to 1.8 liters, the all-aluminum units aim to provide Daimler and Renault with a dramatic improvement in production efficiency. Sources close to the deal say annual production volumes of up to 4 million units are achievable in the longer term.
“The anchor of the cooperation is powertrains. It’s all about translating size into scale,” a Nissan source told AutoWeek.
The new engines, to be engineered by Daimler and produced by Renault, are aimed at a range of models, including Mercedes-Benz’s upcoming second-generation B-class, set to debut at the 2011 Frankfurt motor show, and the third-generation Mercedes A-class, scheduled to appear in 2012, as well as future versions of the Renault Clio and Megane as well as a range of Nissan models.
The new engines are in development at Daimler’s R&D center in Sindelfingen, Germany, with input from a group of 30 Renault engineers. But it will be at least three years before they are ready, according to AutoWeek sources.
Until then, Mercedes-Benz will rely on the existing M271 EVO gasoline engine used in the C-class. Originally conceived as a 2.0-liter unit, the engine will be reduced in capacity to 1.6 liters and 1.8 liters for the future A- and B-class models. The new small Mercedes cars will no longer use the underfloor engine-mounting arrangement of the current models and thus require a new family of engines. The smaller-capacity engines go under the internal code name M274.
Earlier proposals by Ghosn for Renault to supply its current range of four-cylinder engines for use in the A- and B-class were blocked by Zetsche, who is keen for both companies to develop contemporary units that satisfy all future emission standards without expensive reengineering to current engines.
Daimler and Renault have also agreed on the development of new three-cylinder gasoline and diesel engines for Project Edison. Details remains scarce, though it is expected the three-cylinder units will use the same cylinder bore spacing as the new four-cylinder engines. Along with future Smart and Renault models, the three-cylinder unit is planned to be used as a range extender in future Mercedes-Benz models previewed by its series of BlueZero concepts.
Shared commercial vans
The third major area of sharing between Daimler and Renault covers light commercial vehicles. According to those close to the talks, Daimler has agreed to use the next-generation Renault Kangoo as the basis for a new entry-level commercial vehicle to replace the Mercedes-Benz Viano.
Sources tell AutoWeek that the Kangoo’s floorpan will be re-engineered to accommodate a new side structure that shifts the A-pillar farther forward and provides the new Mercedes-Benz a distinctive one-box profile. It results in improved packaging as well as visual differentiation from the Renault product.
Engines for the new Mercedes commercial vehicle, which is expected to compete with the Volkswagen Caddy, are likely to be sourced from Renault, although Zetsche and Ghosn have also raised the possibility of developing a less-expensive and less-advanced range of engines specifically for commercial vehicles.
Plug-in electric versions of the van, using the same battery technology from China’s BYD as Project Edison, are planned.
A future small Infiniti?
Although not part of the initial deal, AutoWeek can confirm Ghosn is also looking at using Mercedes-Benz’s new front- and four-wheel-drive MFA platform from the new A- and B-class for a proposed entry-level Infiniti model.
“It is not a great leap of imagination to suggest Infiniti could begin building smaller cars for certain markets. If we want to position Infiniti as a serious player in Europe we will need a smaller car,” a Nissan official said.
Also under discussion is an expansion of the agreement that could see Daimler supply Renault with V6 and V8 gasoline and diesel engines, and a new automatic transmission to replace today’s seven-speed 7G-Tronic unit for use in future Infiniti models.
Further talks center on sharing an all-electric version of Mercedes-Benz’s Vito commercial van, which is set to be unveiled at this year’s Hanover commercial-vehicle show. Insiders say it could be rebadged as a Nissan for sale in select Asian markets.
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