Renault, Nissan and Daimler will swap stakes and jointly develop cars in a tie-up that could lead to combined savings of 4 billion euros ($5.35 billion) over five years.
Renault and Daimler have been discussing cooperation plans for some months as carmakers worldwide seek partnerships that boost their competitiveness by sharing technology investment costs and gaining scale and access to new markets.
The three carmakers said on Wednesday they would take small stakes in each other. Renault and Nissan Chief Executive Carlos Ghosn told Le Monde the companies could raise their cross-shareholdings in future.
The automobile sector is scrambling to meet tightening emissions reduction rules as it emerges from a savage downturn that has highlighted the need for profit-chasing carmakers to boost scale, conquer new markets and increase efficiency.
Ghosn said the 11-year-old Renault-Nissan alliance could expect to draw around 2 billion euros of synergies from the partnership with Daimler over the next five years.
If you have scale but you don't make scale work for you through sharing platforms and sharing engines and making smart decisions locally, geographically, scale is just complexity and confusion, Ghosn told a news conference in Brussels.
Daimler Chief Executive Dieter Zetsche said the potential synergies for Daimler would be of the same order of magnitude.
Right away, we are strengthening our competitiveness in the small and compact car segment and are reducing our CO2 footprint, he said.
Daimler, which along with the luxury Mercedes-Benz brand owns struggling Smart, will benefit from Clio-maker Renault's small-car expertise, while Renault and Nissan will be able to make use of Daimler's engine know-how.
Daimler is following in the footsteps of Volkswagen AG which in December announced a pact with Japan's Suzuki Motor Corp that similarly called for cross shareholdings and cooperation on engines and small vehicles.
Zetsche insisted the new partnership would not resemble Daimler's ill-fated merger with U.S.-based automaker Chrysler, which ended in 2007. Both the start and the ending of (cooperation with) Chrysler will not compare, he said.
Taking his cue from Zetsche, who had opened the news conference by quoting French writer and philosopher Voltaire, Ghosn cited German philosopher Nietzsche to describe how Renault and Nissan's 11-year alliance has worked, despite initial industry skepticism. What does not kill you makes you stronger, he said.
The three carmakers said they plan to cooperate on electric cars, passenger cars and light commercial vehicles, as well as jointly developing and sharing diesel and gasoline engines.
Mercedes needs an ally in small vehicles -- for them it is vital. Renault needs to spread out development costs so the agreement is also important for their profitability, a Paris-based analyst said.
Shares in Renault were 1.3 percent lower at 1353 GMT while Daimler shares were little changed. The STOXX Europe 600 auto index .SXAP was down 0.8 percent.
We think that possible synergies from the cooperation with Renault/Nissan are limited and will only be realized mid-term, DZ Bank analyst Michael Punzet wrote in a note, adding that he was skeptical about possible dilution of the Daimler brand.
Specifically, the cooperation includes the next-generation Smart fortwo and Renault Twingo models, including electric versions, as well as expanding the Smart and Twingo families.
Ghosn said cooperation between the Mercedes A-Class and the Renault Clio was entirely foreseeable, although there were no current plans.
The agreement also includes the sharing and co-development of diesel and gasoline engines from the Renault-Nissan alliance to be used in the new smart and Twingo.
They will also be adapted and modified with Mercedes-Benz characteristics for its new generation of premium compact cars.
The carmakers plan to share gasoline and diesel engines from Daimler with Infiniti, the luxury division of Nissan, providing the opportunity for further collaboration.
They also plan to share a Renault-Nissan diesel engine and transmission for the Mercedes-Benz Vito.
Daimler will take 3.1 percent shareholdings in Renault and Nissan, who will both hold 1.55 percent of the German carmaker under the deal, the companies said.
Renault's Nissan stake -- the two already have large cross-shareholdings as part of their 11-year alliance -- would slip to 43.4 percent from 44.3 percent. The French government pledged to support the partnership, and said the state would buy 0.55 percent of Renault to keep its holding at 15.01 percent.
(Additional reporting by Gilles Guillaume; Editing by Rupert Winchester and Erica Billingham)