Renault alliance woes highlight need for tech focus

By Janaki Krishnan and Helen Massy-Beresford

MUMBAI/PARIS (Reuters) - Renault's falling sales in India and Russia and tension with its partners underline the risks of car sector tie-ups and suggest that the infusion of technology, rather than cash, is the solution.

Consolidation is playing a part as automakers seek critical mass to help them back on to their feet after the crisis of the past year, with technology partnerships, in particular, driven by a push towards zero emissions.

France's PSA Peugeot and Germany's BMW are looking at ways to deepen their existing cooperation, while Italy's Fiat took management control of Chrysler after buying a stake as part of a government-backed reorganisation.

And parts maker Magna is poised to take a majority stake in General Motors unit Opel.

But in an industry littered with the skeletons of failed partnerships, the problems Renault is facing now in Russia and India, where Avtovaz is on the brink of bankruptcy and Renault Mahindra's Logan sales are falling -- and the solutions it finds -- may provide valuable lessons for other carmakers.

Morgan Stanley on Tuesday cut its rating on Renault because of delayed dividend from Nissan, Avtovaz and Volvo.

When Renault bought its 25 percent stake in Russian carmaker Avtovaz for about $1 billion in 2008, an entry into the burgeoning Russian car market -- tipped to overtake Germany as Europe's biggest before the crisis -- seemed a good deal.

"Unfortunately the wheels fell off, both the Russian economy, the auto industry, and then Avtovaz," said Nomura International analyst Michael Tyndall.