Nissan, Renault and Daimler on Wednesday announced a partnership that will see the three companies take 3.1 percent mutual equity stakes and work together on small cars, engines and light commercial vehicles.
The carmakers said they were also studying future areas of co-operation, including sharing parts between Daimler's Mercedes-Benz brand and Nissan's Infiniti luxury marque, and working together in the US, China and Japan.
The share exchange will see Renault issue new stock for Daimler's 3.1 percent stake in the French carmaker. Daimler will get 3.1 percent of Nissan from its existing shares, while Renault and Nissan will each get 1.55 percent of Daimler's treasury shares.
In a statement ahead of a scheduled press conference in Brussels, the three companies also said they would explore working together on technologies relating to electric vehicles and batteries.
Dieter Zetsche, Daimler chief executive, said the deal marked the foundation for a "successful, strategically sound co-operation that is based on a number of very concrete and attractive co-operations".
Carlos Ghosn, chief executive of Renault and Nissan, said the agreement would "create lasting value" for the French and Japanese companies' 11-year-old alliance and for their new German partner, as the three groups worked together to broaden and strengthen their product offerings.
The partnership will be managed through a new co-operation committee co-chaired by Mr Ghosn and Mr Zetsche and steered by executives from the three companies.
The deal comes amid a growing consolidation trend among carmakers, which are seeking to pool production and CO2 compliance costs to improve their margins to cover investments during a severe downturn in their industry.
Renault and Daimler said in December that they were talking about working together on small cars, which the German carmaker cannot make competitively because of its high costs and low volumes. The talks were later extended to include Nissan and the swap of mutual equity stakes.
As previously reported, Renault and Daimler will work together on a forthcoming generation of their respective Twingo and Smart Fortwo models, including electric versions.
The jointly developed models would be launched starting in 2013, with the two-seater versions of the cars built at Smart's plant in Hombach, France, and the four-seater cars built at Renault's plant in Novo Mesto, Slovenia.
The models will be available in electric versions from their launch.
Daimler, Renault and Nissan will also share and co-develop diesel and petrol engines to be used in the new Smart and Twingo models, which will be modified for a new generation of premium compact cars for Mercedes.
Daimler will also provide petrol and diesel engines for Infiniti. The companies described this as "a win-win situation for both sides", as Infiniti could use Daimler engines and Daimler would use more plant capacity for them.
In light commercial vehicles, Renault will help Mercedes-Benz develop a new entry-level vehicle to be launched from 2012 and built at Renault's plant in Maubeuge, France. They will also share engine parts in order to expand their offering of mid-sized vans.
The two carmakers said that they would reap "additional synergies" through joint purchasing and sharing of operational benchmarks and best practices, but gave no figure for the amount of cost savings.
Renault owns 44.3 percent of Nissan under their alliance formed in 1999, and the Japanese carmaker owns 15 percent of Renault.
In early European trading, Renault shares were 1.1 percent lower at €36.48 ($48.74) while Daimler moved up 0.7 to €35.74 ($47.75). The alliance was announced after the close of trading in Tokyo, where Nissan shares ended the day 0.4 percent stronger at Y825.