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European carmakers under cost pressure to form alliances

From Reuters| March 08,2007

Faced with a growing number of models and mounting pressure to reduce emissions, European carmakers are forming alliances to share parts, factories and research to cut costs in the highly competitive industry.

Not only are they doing it to keep down the retail price of their cars, but also to share the cost of developing new technologies such as hybrid engines.

"That is the biggest challenge for the industry: how to boost the quality and to multiply the number of models," PSA/Peugeot-Citroen CEO Christian Streiff said at the Geneva auto show. "For us, it is a matter of a shared platform policy and the use of common parts."

Despite having shunned the idea for fear of diluting its premium brand, Porsche has also begun to show an openness to the idea.

"We have no fear of contact," CEO Wendelin Wiedeking told reporters at the show. He did not elaborate.

Renault has the ultimate alliance with Nissan Motor Co. Ltd., in which the French automaker owns about 44 percent.

But in terms of the number of alliances formed, PSA/Peugeot-Citroen and Fiat lead the way.

For example, Fiat is building its new Cinquecento model on a platform for small cars being jointly developed with Ford Motor Co., while PSA/Peugeot-Citroen is making engines with Ford and relies on Mitsubishi Motors for its SUVs.

Fiat and PSA/Peugeot-Citroen even make a van together.

Although it has more than 10 alliances, Fiat Auto brand head Luca De Meo said he was always ready to consider forming more.

"If there's an opportunity that would be benefit us and would be consistent with our strategy, we will look at it," he told Reuters.

Alliances are also helping them enter new markets, such as China and India, two burgeoning markets where local expertise is essential.

On Feb. 26, Nissan said it would join Renault and Mahindra & Mahindra to build a car factory in India.

Renault and Nissan had held talks with General Motors but its talks with the U.S. giant got nowhere.

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