Looking for savings Renault-Nissan and Daimler have agreed to jointly develop cars and each take a stake in the other.
They say the tie-up could lead to combined savings of four billion euros over five years.
It is the latest such partnership as carmakers worldwide try to become more competitive by sharing the costs of technology investment and gain scale and access to new markets.
Daimler will take a 3.1 percent stake in its new French-Japanese partner and vice-versa.
Their first joint project involves the 2013 roll out of new Smart and Renault Twingo models. The diesel and petrol engines for those cars will be jointly developed.
Carlos Ghosn, CEO Renault-Nissan said: “In the mid-term both Renault and Nissan will benefit from vehicles and powertrain projects that help us offer better products at a lower cost.’‘
Daimler’s CEO Dieter Zetsche said this should help turn around its loss making Smart division: “First of all, we have created the basis to make the next-generation of Smart cars in a successful and economically sustainable way.”
Investors were not that impressed with the tie up and the companies’ shares fell.
Industry analysts said possible savings through synergies were limited and would not be immediate.