Daimler Turns West, Aims to Buy Stake in Renault

The rumors surrounding a possible marriage between German giant Daimler and French manufacturer Renault are increasing in intensity, as a supposed acquisition of Renault stock from Daimler's part is said to come as soon as next week. According to Autonews, Daimler is eyeing, for start at least, a small 3 percent ownership in the French manufacturer.

To avoid spending cash for the operation and calm down investors over the 2009 lack of a dividend, Daimler is said to be using treasury shares.

According to those with knowledge of the matter, the reasoning behind this move is tapping into the growing small-car segment, where Daimler is only present with its somewhat under-performer smart.

"They don't make any real profit with Smart. ... The development costs are too high to justify its own architecture, so they need to find a partner to increase overall production volume," Henner Lehne, industry forecaster for CSM was quoted as saying by Autonews.

Most likely, the involvement in Renault would turn into a four-seat smart, built on Renault's B-platform.

If true, this is the second attempt made by the German carmaker to partner with a big manufacturer. Last year, it tried a cross-ownership with rival BMW, an attempt dismissed by the latter. Such an outcome with Renault is also on the table. Of course, targeted percentage did put some smiles on some analysts' faces.

"There is no absolute need for cross-shareholding to achieve the cost savings within a partnership, but it could be an internal signal to staff at both carmakers that they have to work together to make this succeed," Fitch Ratings analyst Emmanuel Bulle told the source.

"A 3 percent stake? At that level no one is obligated to do anything really, so I would try and dampen expectations before the market starts to estimate billions in synergy potential."