January 8, 2012 4:45 pm

Nissan and Daimler in US engine venture

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Nissan and Daimler will build engines together in the US from 2014 in an efficiency measure that marks the biggest undertaking outside Europe yet for the carmakers’ two-year strategic partnership.

The Japanese and German companies said on Sunday that they would build 4-cylinder petrol engines together at Nissan’s plant in Decherd, Tennessee from 2014.

The engines will be used in Daimler’s Mercedes-Benz C-class and Nissan’s Infiniti premium marque. The plant will have enough capacity to build 250,000 engines a year at full capacity.

It will be the first time Mercedes has made engines in North America, and comes amid intensifying competition in the US premium car market, the largest in the world.

Rival German luxury marque BMW outsold Mercedes in the US for the first time in 2011, data published last week showed.

The announcement comes on the eve of the North American International Auto Show in Detroit, held this year against the backdrop of a resurgent US car market, where premium carmakers are reaping some of the richest rewards.

Daimler and Nissan said the Tennessee plant’s strategic location and logistics links would ensure a direct supply of engines from 2014 for Mercedes’ C-Class midsize car, which the German carmaker builds at its plant in Tuscaloosa, Alabama. It currently uses German-built engines in its US-made cars.

BMW, which makes its X3 and X5 models at a plant in South Carolina, imports the engines from Germany and Austria.

By extending Daimler’s co-operation with Nissan and its French alliance partner Renault “we can realise near-market engine production in the Nafta region on attractive economic terms and make optimum use of synergies arising from the co-operation,” Dieter Zetsche, the German company’s chief executive, said on Sunday.

He added: “Thus we are systematically broadening our manufacturing footprint in this important growth market.”

The engines project will also provide a cost-cutting fillip to Infiniti, which makes the bulk of its cars in Tochigi, Japan, but has its biggest sales in the US. Like all of its Japanese rivals, Nissan has been hit by the soaring yen.

Carlos Ghosn, Nissan and Renault’s CEO, said the engine project would reduce the Japanese carmaker’s exposure to foreign exchange rates, and that it represented a “win-win for the [Renault-Nissan] alliance and Daimler.”

Nissan has made engines at the Tennessee plant since 1997, and supplies its own brand and Infiniti vehicles with 4-, 6-, and 8-cylinder engines. The factory made more than 580,000 engines last year.

The project marks a further expansion of ties between Renault and Nissan – which have operated in a close alliance since 1999 – and Daimler, which joined them in a looser partnership in April 2010 that saw the Franco-Japanese and German groups take 3 per cent mutual equity stakes and agree to collaborate on small cars, engines and commercial vehicles.

Competing carmakers often collaborate in areas where they can pool costs without sacrificing market share, such as engine development.

Renault-Nissan and Daimler, when they first announced their partnership, outlined plans to co-operate on Renault’s next-generation Twingo small car and two- and four-seat versions of Daimler’s Smart car due to launch in early 2014.

Renault and Nissan are supplying Daimler with 3-cylinder petrol engines to be used in the cars and 4-cylinder diesel engines to be used in a new city van being developed by the partnered carmakers for Mercedes, and in the German brand’s next generation of compact cars.

Daimler will also supply Nissan and Infiniti with 4- and 6-cylinder diesel engines and automatic transmissions.

Infiniti, while popular in the US, has struggled to gain significant market share in regions including Europe, in part because of a portfolio skewed towards larger, petrol-engined cars.

At last year’s Frankfurt auto show, Mr Ghosn and Mr Zetsche announced plans to develop a new premium compact car for Infiniti based on Mercedes architecture from 2014. Daimler and Renault-Nissan also said they would work together on batteries and motors used in electric cars.

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