Nissan to build Mercedes engines in Tenn.

Nissan Motor Co. and Daimler AG said they have agreed to produce four-cylinder Mercedes-Benz gasoline engines at Nissan's Decherd, Tenn., engine factory starting in 2014 to be fitted on Mercedes-Benz and Infiniti models.

Since April 2010, Nissan and its alliance partner Renault SA have an agreement with Daimler to share vehicle and powertrain technologies.

"This is the newest milestone in our pragmatic collaboration and our most significant project outside of Europe so far," Renault-Nissan CEO Carlos Ghosn said in a statement Sunday. "Localized capacity reduces exposure to foreign exchange rates while rapidly enabling a good business development in North America–a win-win for the Alliance and Daimler."

It makes real sense for Mercedes as it provides a direct supply of engines for the Mercedes C-class vehicles produced at Daimler's nearby plant in Tuscaloosa, Ala.