European car firms’ drive for alliance falters

DAIMLER and Renault have been unable to resolve differences over valuations as the car makers explore a share swap that would bring Daimler into the Renault-Nissan alliance, two reliable sources said yesterday.
Daimler and Renault, which said in December they were in talks about jointly developing small cars, had also been discussing a share swap, the sources said.
Daimler is seeking a partner to improve profitability of its Mercedes A-Class and Smart cars by sharing development of vehicles and engines. The discussions were “more extensive and more advanced than realised”, Sanford C Bernstein analyst Max Warburton wrote in a report on Monday, citing “industry contacts”. An equity tie-up would bring “financial and strategic security” to Renault, the London-based analyst wrote.
“I struggle to see the will on both sides” for Daimler and Renault to swap stakes, said Philippe Houchois, an analyst at UBS in London who has “buy” ratings on Renault and Daimler shares. “There isn’t much scope for the companies to co-operate beyond small cars.”
Florian Martens, a Daimler spokesman, declined to comment on any share-swap negotiations with Renault. Daimler, based in Stuttgart in Germany, is discussing joint production of small cars with car makers including Renault, he said, repeating comments by Daimler CEO Dieter Zetsche. Simon Sproule, a spokesman for Renault-Nissan, said he had “nothing to add” to remarks by CEO Carlos Ghosn, who said on March 3 that there was no “particular prospect” of an equity tie-up for the alliance.
Renault, which is based in Boulogne-Billancourt, rose as much as 67c, or 2%, to à 34,24 and traded at à 34,22 before midday in Paris, valuing the company at à 9,7bn. Daimler gained 37c, or 1,1%, to à 33,70 in Frankfurt, giving it a market valuation of à 35,8bn.
Daimler aims to boost sales of small cars to lower carbon-dioxide emissions to meet tighter regulations. The company is also looking to double its offering of compact Mercedes-Benz models to four to attract younger drivers.
Mercedes drivers are 55,6 years old on average in German-speaking Europe, compared with 45,6 years for BMW and 47 for Audi, according to research firm Sinus Sociovision, of Heidelberg in Germany.
Daimler is building a new factory in Hungary as part of a à 1,4bn investment in compact models, which will introduced next year.
Source: Business Day