Nissan halts joint development of luxury cars with Daimler

PARIS: Nissan is halting joint development of luxury cars with Daimler’s Mercedes-Benz, sources close to the companies said, suspending a key project in their seven-year partnership and potentially hitting profitability at a new shared factory in Mexico.
Nissan decided in October its premium Infiniti brand would not use “MFA2”, an upgraded Daimler car platform that the companies have jointly funded, in part because Infiniti was not performing well enough to absorb Mercedes technology costs, the sources said.
“It wasn’t possible to close a deal on the basis of MFA2,” said one of the people. “The targets set by Infiniti were too difficult to achieve.”
The move could reduce efficiency at a $1 billion shared factory opening this year in Aguascalientes, Mexico, where the companies had planned to use the same compact car architecture to cut complexity and production costs, two of the sources said.
It could also ultimately force Nissan to write down part of a £250 million ($306 million) investment at its UK plant that included Mercedes-based tooling, they added.
Daimler and Nissan pursue joint programmes only when “beneficial for both sides”, the companies said in separate statements to Reuters, without directly addressing emailed questions about their plans for MFA2 vehicles.
Projects are constantly reviewed against targets to account for “developments beyond the control of management”, they added, and discussions about joint development of future premium compact cars are ongoing. Nissan’s decision deals a blow to the broad cooperation deal struck between Renault-Nissan boss Carlos Ghosn and his Daimler counterpart Dieter Zetsche in 2010.
It also underscores the mixed results of Nissan’s battle over almost three decades to transform Infiniti into a significant global player in the lucrative luxury car market. The decision predates Donald Trump’s election as the next US president, the sources said, and was unrelated to campaign vows to penalise Mexican imports that have rattled the auto industry. Ford on Tuesday scrapped a planned compact car plant in the country.
Nissan and Daimler are pushing ahead with Aguascalientes, where they will build Infiniti and Mercedes models for the US and other markets from a single assembly line opening in 2017.
The project nonetheless faces weakening US demand for smaller cars that contributed to Ford’s cancellation and has further raised profitability hurdles for new Infiniti compacts.
Persistently low oil prices accelerated the market shift to larger vehicles in 2016, Ford sales chief Mark LaNeve said on Wednesday. “All the growth was SUVs and trucks.”
Infiniti has struggled outside the United States, last year selling 16,000 vehicles in Western Europe and 230,000 globally — less than 5 per cent of Nissan’s overall tally and barely one-tenth of Mercedes’s expected 2 million deliveries. The first Infiniti appeared in 1989, the same year as the launch model for Toyota’s upscale Lexus brand — which has since grown three times bigger by sales. — Reuters