French automaker Renault has announced it is in talks with GermanyÔÇÖs Daimler about a possible partnership on small and compact vehicles.
The two carmakers are looking at areas including engines, transmission platforms and new technologies.
It is the latest in a series of potential new alliances and tie-ups between automakers hit by the recession, who are seeking to cut the cost of developing new technologies and smaller cars.
Stuttgart-based Daimler has long been expected to form an alliance in the small car arena, where it struggles to be as profitable as many of its rivals.
Renault, which is headquartered in Boulogne-Billancourt, just west of Paris, is also said to be in talks with a number of other automotive companies over possible collaboration.
Renault had been in discussions with Japan's Suzuki Motor Co before that company eventually decided to link up with Germany's Volkswagen.
Meanwhile, Renault's rival Peugeot-Citroen and Japan's Mitsubishi Motors Co recently announced plans to further their existing collaboration.
Peugeot-Citroen jointly manufactures small cars, commercial vans and four-wheel-drives with Toyota and Fiat, as well as Mitsubishi.
Renault is already strengthening its alliance with its Japanese partner Nissan Motor Co and Russia's AvtoVAZ as they aim to become the powerhouse of Russia's automobile industry in the coming years.
Eventually the three firms hope to control between 25 per cent and 30 per cent of the Russian market, with combined sales of seven to eight million vehicles by 2013.
Renault already shares parts and some vehicle development with Nissan.
Renault's revenue in 2009 could experience a drop of 17 to 18 per cent compared with 2007; but the company is expecting a reduction in fixed costs and investment spending of 18 per cent and 24 per cent respectively over the two years.
Renault's revenue for the first nine months of this year was down 20 per cent from the same 2008 period; however, its sales recovered in October and November.
Renault posted revenues of Ôé¼40.68 billion for 2007 and Ôé¼37.79 billion in 2008.
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