Daimler and Renault-Nissan took another step forward in their collaboration last week with the announcement that they will produce engines together in the US from 2014.
Nissan’s plant in Decherd, Tennessee (pictured) will build Mercedes-Benz 4-cylinder engines for Infiniti and Mercedes-Benz C-Class vehicles, with installed capacity of 250,000 units per year once full ramp–up is achieved.
According to the companies, the Tennessee plant’s strategic location and logistics links will ensure a direct supply of engines for Mercedes C-Class production in Tuscaloosa in Alabama.
“In the context of our Mercedes-Benz 2020 growth strategy, we have decided that we will expand the production capacities required for this close to the customers. Through the strategic extension of our cooperation with Renault-Nissan we can realise near-market engine production in the NAFTA region on attractive economic terms and make optimum use of synergies arising from the cooperation,” said Dr Dieter Zetsche, chairman of the Daimler Board of Management and head of Mercedes-Benz Cars.
The move is a significant development in the strategic partnership, which began in April 2010, and is the first time that Mercedes has made engines in North America. Thus far it has used German-built engines shipped to the US for vehicles made there.
"This is the newest milestone in our pragmatic collaboration and our most significant project outside of Europe so far," said Renault-Nissan CEO Carlos Ghosn. "Localised capacity reduces exposure to foreign exchange rates while rapidly enabling a good business development in North America – a win-win for the Alliance and Daimler."
Under the terms of the initial agreement Renault-Nissan Alliance has a 3.1% stake in Daimler and Daimler has a combined 3.1%interest in Renault and Nissan. The level of integration between powertrain and vehicle architecture involved in the agreement, including a joint smart/Twingo architecture, also for launch at the beginning of 2014, suggests that there are likely to be more shared logistics flows as the collaboration moves forward, though neither company was willing this week to discuss the details of its logistics strategy regarding engine shipments between Decherd and Tuscaloosa.
Besides the latest announcement about North American engine production, the companies have also decided to partner on platform sharing: Infiniti plans to base a premium compact vehicle on the Mercedes compact-car architecture, starting in 2014.
Both groups have said they would pursue “selective common purchasing opportunities” and would look to take advantage of geographic presence in their sharing of components and modules. The potential for shared logistics services could open up opportunities for collaboration and cost savings through joint purchasing strategies, as well as in terms of shared logistics providers.
Since 2009, the Renault Nissan Alliance has become more aggressive in combining logistics operations between the two OEMs. While earlier it had combined wider purchasing, logistics had still remained somewhat separate until the internal logistics and purchasing organisations were put under a single management umbrella, with hard targets set for finding common benefits in supply chain management.
The benefits of these savings has been found in logistics engineering and design as well as in operations. In the current issue of Finished Vehicle Logistics, the Alliance revealed the extent to which Renault and Nissan are combining tenders, ports and providers for outbound logistics. Currently, it has not realised potential outbound savings with Daimler but both sets of management have expressed interest (read full feature here).
Nissan started powertrain assembly in Decherd in 1997 and currently makes 4-, 6- and 8-cylinder engines for the complete lineup of US-produced Nissan and Infiniti vehicles. The plant also houses crankshaft forging and cylinder block casting operations. In 2011, the plant produced more than 580,000 engines.