Mercedes to help Nissan make luxury cars

15 September 2011 Last updated at 23:01 GMT By Jorn Madslien Business reporter, BBC News, Frankfurt motor show Trust and mutual benefits are vital to make partnerships in the motor industry work, according to Dieter Zetsche and Carlos Ghosn Getting Mercedes engineers to help may seem natural for anyone who wants to build a luxury car.

So that is exactly what Carlos Ghosn has done - even though he is in charge of two rival carmakers, the alliance partners Renault and Nissan.

Mr Ghosn is also the ultimate head of Nissan's luxury car subsidiary Infiniti.

And he has now revealed that a new, compact Infiniti will be built using Mercedes architecture.

Exactly why one luxury carmaker would lend a chassis to help another may be difficult to fathom, though Dieter Zetsche, chief executive of Mercedes' parent company Daimler, is happy to explain.

Firstly, he reasons, Infiniti is not a major Mercedes competitor as it seems to be more of a BMW rival.

"The cross-shopping between Infiniti and Mercedes is extremely limited," he says in an interview with BBC News.

"The similarities between Mercedes and Infiniti are few," he continues, deeming Toyota's luxury marque Lexus a more similar rival.

Developing partnership

The Infiniti-Mercedes platform sharing deal is the latest project in an 18-month-old strategic partnership between Daimler and the Renault-Nissan alliance.

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The industry needs this kind of co-operation, but recent events show us it's not easy to make it work”

End Quote Carlos Ghosn Chief executive of Renault-Nissan The partnership also includes an agreement to supply Infiniti with Mercedes engines. In return, Mercedes will get to use Renault engines in its small A-Class model.

The carmakers are also producing a small delivery van that will be sold under the Renault and Mercedes badges, and they are working together on battery technology for electric cars.

And this is just the beginning, according to Mr Ghosn, as the partnership is set to deepen considerably, delivering savings of some 4bn euros ($5.5bn; £3.5bn) in the process.

"This co-operation has been extremely successful and extremely productive," Mr Ghosn says in an interview with BBC News.

"We have a very good base. We can develop a lot of projects from this base.

"When we combine our research and development, we have more resources than anyone in the automotive industry, but we are also trying to identify areas where you can avoid investing by using existing components."

Soaring sales

Mercedes hopes the partnership will help it supply more small cars in the future, as it tries to regain the position as the world's best-selling luxury car company, a position lost to BMW a few years ago.

Infiniti wants to add more models as it guns for global sales of more tan 500,000 cars per year

"When we go for leadership in the premium segment, we definitely need the volume leadership as well," Mr Zetsche says, insisting Mercedes will retake the top slot "at the latest by the end of the decade".

Infiniti is also gunning for dramatic growth on the back of a string of new model launches, with its global sales set to more than treble over the next six years to some 500,000 cars per year.

"It is a tremendously ambitious plan," Andy Palmer, Nissan's global head of planning and marketing and global head of Infiniti, tells BBC News in an interview.

Europe plays a central part in the strategy, with plans to sell more than 100,000 cars per year within six years from just 6,500 currently.

The Mercedes-based Infiniti will be built outside Japan because the strong yen makes it difficult to make profits from exports from the country, Mr Ghosn says.

The car could be built in Europe, though a final decision has not yet been taken.

'Not easy'

With increasing cost pressures and weak market conditions, the motor industry could benefit a great deal from closer co-operation, Mr Ghosn believes.

Mercedes does not see Infiniti as a direct rival

"The industry needs this kind of co-operation," he says, "but recent events show us it's not easy to make it work."

Earlier this week, Volkswagen Group's alliance with Suzuki begun to unravel and its planned merger with Porsche has been delayed. Saab seems to be heading for bankruptcy after having failed to finalise deals with two Chinese companies. And Fiat Auto subsidiary Alfa Romeo has cancelled a plan to make a full-size sports utility vehicle based on a Jeep as part of the new Fiat-Chrysler alliance.

To make partnership in the motor industry work, it is crucial to operate in a transparent and open way, according to Mr Ghosn.

"At the initial phase, personal trust between the heads of the companies is essential," says Mr Ghosn, who has known Mr Zetsche for several decades.

"If this trust doesn't exist, nothing happens," he says.

It is also important to be pragmatic, he continues. "We did not start with principles, we started with projects," he says. "But everything can be discussed."

And every single deal must bring benefits to both, to avoid resentment.

"People always remember when they've lost," Mr Ghosn says, "never when they win."

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