Germany’s Daimler AG (DAI) has entered into discussions with France’s Renault SA to acquire mutual equity stakes that would add the former to the alliance, which already includes Japan’s Nissan Motor Co. The stakes to be acquired are likely to amount to less than 10%.

In December last year, Daimler and Renault announced plans to jointly develop small cars. The talks about exchanging equity stakes are just a part of that announcement.

Daimler is now interested in enhancing the profitability of its Mercedes A-Class and smart fortwo cars by sharing the development of vehicles and engines with Renault (and thereby Nissan). In 2009, sales of smart fortwo cars plunged 41% to 14,600 units while sales of Mercedes A/B Class fell 14% to 215,500 units.

In 1999, the Renault-Nissan business was formed, in which Renault held a 44.3% stake in Nissan, while Nissan held a 15% stake (non-voting) in Renault. In 2006, General Motors had revealed its plan to join the alliance. However, the talks failed in the same year.

Although Daimler has a history of unhappy tie-ups with other carmakers Incorporatedluding Mitsubishi, Hyundai and Chrysler, it does need a partner for small cars, an area where it struggles to be profitable.

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