Mitsubishi, Renault Scrap Car-Making Tie-Up--Update

By Yoko Kubota And Jason Chow 

Renault SA and Mitsubishi Motors Corp. are scrapping a plan to cooperate on producing and selling sedans, a blow to the French auto maker's plans to exploit its spare capacity and to the Japanese manufacturer's hopes of expanding its product range in the U.S.

The move, confirmed by a Mitsubishi spokesperson, is a setback for the broad cooperation plan Renault, its alliance partner Nissan Motor Co., and Mitsubishi struck in 2013 to reduce typically steep development costs.

"We were conducting a feasibility study hoping for a win-win situation. But it wasn't feasible," said Tetsuji Inoue, a spokesman for Mitsubishi Motors. Costs and currency-related issues weighed on the plan, Mr. Inoue said.

Partnerships are central to the Renault-Nissan alliance's strategy. The two car makers--which aren't formally merged but share purchasing, manufacturing and management systems--have traditionally eschewed large acquisitions to grow their business.

Under Chief Executive Carlos Ghosn, the alliance partners have preferred to sign deals with rival car makers to share expertise and manufacturing capacity as a way to defray high capital costs of developing new cars. The alliance most notably signed a deal with Daimler AG in 2010 to cooperate primarily on small cars and vans.

Among the plans that Renault-Nissan and Mitsubishi were considering was one to rebrand one of Renault's larger sedans made at its struggling Busan plant in South Korea and sell them as Mitsubishi cars in the U.S. and Canada.

Mitsubishi, one of Japan's smaller auto makers, is focusing on sport-utility vehicles and pickup trucks. The auto maker doesn't have a strong sedan lineup in the U.S., a popular segment in the country, unlike Japanese rivals Toyota Motor Corp. and Honda Motor Co.

For Renault, Europe's third-largest car maker by volume, the plan represented a way for the company to introduce its models into the U.S. market. The French car maker currently doesn't sell its cars in the U.S., the world's second-largest car market after China.

The companies were also considering rebadging a smaller Renault sedan as a Mitsubishi car globally. This plan has also been scrapped, Mr. Inoue said, though Mitsubishi is still considering how to introduce such a car into the global market. It hasn't ruled out searching for other partners.

Mia Nielsen, a spokeswoman for the Renault-Nissan alliance, said "it is too early" to speak about details on future projects and wouldn't confirm that the plan was being abandoned. A person familiar with the matter said that the project was scrapped because Renault didn't foresee enough sales volume to make the joint-venture profitable.

Nissan and Mitsubishi are still considering joint development of a small car, including an electric version, Mr. Inoue said. The two auto makers already sell a jointly-developed 660cc mini car, which is produced at a Mitsubishi plant in Japan.

Write to Yoko Kubota at [e-mail] and Jason Chow at [e-mail]

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