The news lifted the companies shares on Tuesday, though the talks are stalled because of a disagreement over valuations, according to Bloomberg News, citing unidentified sources.
Daimler has been trying to build a partnership to build better small cars, but in his analyst note, Mr. Warburton says discussions between Carlos Ghosn, chief of Renault, and Dieter Zetsche, who heads Daimler, have taken on additional importance.
The discussions are more extensive and more advanced than realised – and may see Daimler join the Renault-Nissan Alliance. Our understanding is that Daimler realises it needs Renault’s help with small cars, but initially wanted a simple licensing or JV agreement. However, our information is that Ghosn is demanding more – and is trying to persuade Zetsche to commit to an equity investment or exchange with Renault and Nissan.
Arguing that Daimler needed Renault more than Renault need Daimler, Mr. Warburton looked at what Mr. Ghosn might be asking for:
Ghosn has long had the “vision” that the Alliance should expand to a third partner. The motivations are complex – part economic (extra scale and shared R&D) and part legacy (Nissan was the idea of Ghosn’s predecessor, Schweitzer, and Ghosn probably wants his own monument). Ghosn said very recently at the Geneva show that he is still looking for another strategic partner to cut costs on global technology and vehicle costs. He said “obviously, we are talking to many people. The name of the game is scale, co-investment and shared technologies”. We believe he is referring to Daimler above all else.
While Daimler may be balking, Mr. Warburton sees a big upside should the deal go through. “We see Daimler taking equity in Renault as a relatively low probability – but high reward – event,” he writes.