An alliance once promising billions of dollars in savings is essentially coming to an end as Nissan plans to halt production at a plant in Decherd, Tennessee that had been building engines developed by Mercedes for use in luxury products sold by both automakers.
The Japanese and German manufacturers — then known as Daimler AG — initially formed their alliance in 2010 as a way to drive down costs, among other things sharing some purchasing operations. In the years that followed, the relationship expanded to include shared vehicle platforms, as well as the joint production of powertrains and vehicles.
The Decherd plant was one of the showpieces of the partnership, producing 2.0-liter 4-cylinder engines for both Mercedes and Nissan’s high-line Infiniti brand. In the last few years, however, the two automakers have unwound most of their joint programs, with the engine operation among the last remaining pieces.
But the Japanese automaker said in a statement this week that it will “suspend operations at the powertrain facility in Decherd pending future product announcements.” While the company won’t discuss what plans will follow, it is clear that it won’t involve any ties to Mercedes.
The end of a once-beautiful relationshp
The German marque this month told dealers that it will no longer use Decherd engines in products including the midsize GLE crossover and Sprinter and Metris vans. Mercedes is discontinuing the sale of the Metris in the U.S. Nissan, meanwhile, stopped using the Decherd engines in its Infiniti Q50 sedan at the end of the 2019 model year. It had only limited applications for the powertrain elsewhere.
It is expected to continue turning to Decherd with a future powertrain line that could serve both the Nissan and Infiniti brands, however. But the timing of the changeover has not been revealed. Automotive News speculated the plant “eventually could be repurposed” to support the company’s $18 billion electrification program.
The relationship between the carmakers got off to an aggressive start, then-Daimler CEO Dieter Zetsche proclaiming the two “are combining common interests to form a promising foundation for a successful, strategically sound cooperation that is based on a number of very concrete and attractive project cooperations. Our skills complement each other very well,” Zetsche said, adding that “The individual brand identities will remain unaffected.”
For his part, former Renault-Nissan-Mitsubishi Alliance CEO Carlos Ghosn made similarly lofty claims for the deal which saw the French-Japanese group take a 3.1% stake in Daimler. In turn, Daimler got a 3.1% in Renault and a 3.1% stake in Nissan.
“This agreement will extend our strategic collaboration and create lasting value for the Renault-Nissan Alliance and Daimler,” Ghosn said in a statement, “as we work on broadening and strengthening our product offering, efficiently utilizing all available resources and developing the innovative technologies required in the coming decade.”
The Carlos and Dieter Show
In what became an annual event nicknamed “the Carlos and Dieter Show,” the two would take the stage at either the Frankfurt or Paris motor shows to update media and analysts on how well the partnership was going. And they frequently added new projects.
Decherd was one of the most significant, along with the creation of COMPAS, the Cooperation Manufacturing Plant Aguascalientes, a Mexican assembly plant 50:50 owned by Daimler and Nissan.
The $1 billion operation was set to produce vehicles for both the Infiniti and Mercedes brands. But it was plagued with problems from the start, noted Stephanie Brinley, principal automotive analyst for IHS Markit. Most notably, the two automakers couldn’t agree on a common manufacturing process. So, while it continues to produce vehicles for both luxury marques, they are assembled on separate lines, limiting potential economies of scale.
“At one time there was promise but the execution didn’t live up to what was expected,” said Brinley, looking back at the decade-long alliance.
A controversial arrest
Speaking on background, several sources at the two automakers said there was another factor that likely contributed to the wind-down of the Nissan-Mercedes relationship: the May 2019 retirement of Dieter Zetsche and the controversial November 2018 arrest of Carlos Ghosn.
The latter executive spent the following year under arrest but escaped to Lebanon during the Christmas holidays in 2019. Since then, the Nissan management team has pushed back on many of Ghosn’s pet programs, among other things placing more distance between the Japanese automaker and its French ally Renault.
While Brinley said she couldn’t confirm that management changes at Nissan doomed the alliance, she told TheDetroitBureau.com that, “If the execs who were most bullish about it are no longer there, it may no longer be a priority” for their successors.
One remaining piece
Now, the final piece of the alliance, the COMPAS plant, appears to be at risk. “Even during its peak year in 2020, the factory did not eke out 50% of installed capacity,” Sam Fiorani, AutoForecast Solutions vice president of global vehicle forecasting, told Automotive News.
The research firm does not expect to see the COMPAS plant to continue production beyond 2026 — though alternatives could be developed before then.