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Daimler and Renault weigh up closer ties over small cars

Germany’s Daimler and French rival Renault are in talks about a possible equity swap, according to a research note put out yesterday.

The two firms are talking about a wide-ranging development deal that would also include Renault’s Japanese partner Nissan, said Sanford Bernstein analyst Max Warburton.

A Daimler tie-up with Renault-Nissan would help Daimler develop its next generation of “smart” cars and provide a shared platform for a new small car. In return, Renault could provide large Mercedes diesel engines for Nissan’s future needs in the US market and hybrid technology for both Renault and Nissan.

However, some observers say that Daimler chief executive Dieter Zetsche initially wants a limited deal to just develop small cars and engines. But Renault chairman Carlos Ghosn wants a broader agreement that would mirror its partnership with Nissan. Warburton says in this scenario the trio could all buy stakes in each other.