By Yoko Kubota And Jason Chow 

French car maker Renault SA's international expansion plans are encountering obstacles with a proposed joint-venture with Mitsubishi Motors Corp. scrapped and its struggling Russian car maker, Avtovaz, disclosing another round of layoffs.

Renault, Europe's third largest car maker, has long championed a growth strategy that relies on partnerships rather than acquisitions and on investing in emerging markets such as Russia.

But that two-pronged strategy have been challenged this week. Mitsubishi said it scrapped a plan to cooperate on producing and selling sedans, citing cost and currency concerns. The plan was conceived as a way for the French auto maker to exploit its spare capacity and for the Japanese manufacturer to expand its product range in the U.S.

The move, first reported by trade paper Automotive News and confirmed by Mitsubishi, is a setback for the broad cooperation plan Renault, its alliance partner Nissan Motor Co., and Mitsubishi struck in 2013 to reduce development costs.

"We were conducting a feasibility study hoping for a win-win situation. But it wasn't feasible," said Tetsuji Inoue, a spokesman for Mitsubishi Motors. Costs and currency-related issues weighed on the plan, he said.

Partnerships are central to the Renault-Nissan alliance's strategy. The two car makers aren't formally merged but share purchasing, manufacturing and management systems.

Under Chief Executive Carlos Ghosn, the alliance partners have preferred to sign deals with rival car makers to share expertise and manufacturing capacity as a way to defray high capital costs of developing new cars. The alliance most notably signed a deal in 2010 with Germany's Daimler AG to cooperate primarily on small cars and vans.

Among the ideas Renault-Nissan and Mitsubishi were considering was rebranding one of Renault's larger sedans made at its Busan plant in South Korea and selling them as Mitsubishi cars in the U.S. and Canada.

For Renault, Europe's third-largest car maker by volume, the plan represented a way for the company to introduce its models into the U.S. market. The car maker currently doesn't sell its cars in the U.S., the second-largest car market after China.

Mia Nielsen, a spokeswoman for the Renault-Nissan alliance, said "it is too early" to speak about details on future development projects and wouldn't confirm that the plan was being abandoned. A person familiar with the matter said that the project was scrapped because Renault didn't foresee enough sales volume to make the joint-venture profitable.

Separately, Russian car maker Avtovaz, which is controlled by Renault-Nissan, said it plans to cut 1,100 people from its workforce during a contraction in the Russian economy. Avtovaz, which is Russia's largest auto manufacturer and makes cars under the Lada brand, is struggling as falling oil prices, rising inflation, a sharp downturn in the value of the Russian ruble and Western economic sanctions have hit the country's economy, sending automotive demand spiraling down.

Last year, Avtovaz slashed its workforce by 12,000 to a current level of around 50,000 employees.

Mitsubishi, one of Japan's smaller auto makers, sold 77,643 vehicles in the U.S. last year compared with Nissan's about 1.39 million in sales and the overall market's 16.52 million, according to researcher Autodata Corp.

The French and Japanese companies also were considering rebadging a smaller Renault sedan as a Mitsubishi car globally. That plan also has been scrapped, Mitsubishi's Mr. Inoue said, though Mitsubishi is still considering how to introduce such a car into the global market. It hasn't ruled out searching for other partners.

Write to Yoko Kubota at yoko.kubota@wsj.com and Jason Chow at jason.chow@wsj.com

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