Nissan halts joint development of luxury cars with Daimler

Nissan is halting joint development of luxury cars with Daimler’s Mercedes-Benz, sources close to the companies told Reuters, 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 pound ($306 million) investment at its UK plant that included Mercedes-based tooling, they added.

Daimler and Nissan pursue joint programs 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 penalize 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.