Daimler and Renault are discussing acquiring mutual equity stakes as part of their talks on cooperation, the Financial Times reported.
Citing two unnamed people briefed on the talks, the newspaper said the possible alliance would take the relationship beyond talks already taking place about cooperating on small cars. The paper said the stakes would likely be below 10 percent in each other.
France's Renault and Germany's Daimler, maker of Mercedes-Benz cars, have made no secret that they are in talks over cooperating to cut costs, pool technology resources and build scale as the industry tries to become more efficient exiting the economic downturn.
Renault-Nissan lacks top of the line cars, despite attempts with the Safrane, Vel Satis or Korean-built Samsung models, while Mercedes seeks smaller cars beyond the A class and Daimler's Smart vehicles.
In December, Daimler and Renault said they were talking about joint projects without giving further details. Reports said the two automakers could develop a joint small-car platform that would be based on Renault's Twingo and would be used by Daimler to underpin a four-seater model for its Smart microcar brand.
The Financial Times said Daimler "urgently needed" a partner for small-car production, an area where the German group struggles to be profitable because of small scale and high variable costs.
The two companies are also discussing working together on light trucks, the paper added, citing one of the people involved in the talks
In an investors report published on March 15, Max Warburton, an analyst at Sanford Bernstein, said Daimler realizes it needs Renault's help with small cars, but initially wanted a simple licensing or joint venture agreement.
However, wrote Warburton, Renault CEO Carlos Ghosn “is demanding more – and is trying to persuade [Daimler CEO Dieter] Zetsche to commit to an equity investment or exchange with Renault and Nissan.”
Talks stumble on valuation issues
Daimler is worth 37 billion euros ($50.9 billion) on the stock market, while Renault, which owns about a third of Japan's Nissan Motor Co, is valued at 9.7 billion euros, according to Reuters data.
Bloomberg said on Tuesday, citing two unnamed sources, that the talks had stumbled on valuation issues -- just as such talks between PSA/Peugeot-Citroen and Mitsubishi Motors Corp. a few weeks ago.
Renault and Daimler declined to comment on the reports. In an e-mailed response to Automotive News Europe, Renault spokeswoman Fredrique Le Greves said: “We are not making comments on rumors.”
Car groups are on the hunt to cut costs by building scale and spreading out heavy investments in new technologies, such as hybrid and electrical vehicles, over large numbers of cars.
Ghosn has often said that the Renault-Nissan alliance, which also includes Russia's AvtoVAZ, could be open to a third partner. Zetsche, after a rocky and costly adventure with Chrysler, is reluctant to dive head first in a new pact.
Ghosn said at the Geneva auto show earlier this month that Renault-Nissan was talking to many people in the industry.
"The name of the game is scale and co-investments and sharing technologies," he said. "You would be surprised at how many companies we are talking with for collaboration. I think it's not only Renault-Nissan, I think it's the whole industry."
Reuters contributed to this report