Today's tie-up between Mercedes-Benz and Renault-Nissan is a something of surprise. After all, although BMW's divorce from the Rover Group is better known in the UK, Daimler's 1998 merger with Chrysler, and Chrysler's global alliance with Mitsubishi, were both complete disasters.

Ideally, after such a financial hammering, a manufacturing giant such as Daimler would be capable of building a future as an independent maker of premium cars, but it faced two insurmountable hurdles. The first, it seems, was cost-effectively building small capacity engines, and the second keeping Smart in business.

Daimler-Renault deal confirmed

Both BMW and Mercedes have been pushed into building smaller front-drive vehicles, partly because of the pressure brought by EU CO2 regulations.

Mercedes' problem was that decisions taken in the early 1990s over its small car strategy have played out very badly. The huge investment in the A-class, with its unique sandwich platform and slanted drivetrain, proved a fiscal dead end.

14 years of the A- and B-class have resulted in huge losses and virtually no technological gain. The new-generation Mercedes small cars will owe nothing to their predecessors.