The two titles had been co-developed by Konno's division, Nintendo EAD Software Development Group No.1, with both projects originally starting with an internal production staff of eight people. According to the latest edition of Iwata Asks, there was "an act of emergency" to complete Mario Kart 7 by the end of the year, forcing Nintendo to bring Retro Studios in on the project.
BOOM video 11006
Nintendo had previously revealed that Retro Studios was brought in to Mario Kart 7's development to design a track around Donkey Kong Country Returns; however, the interview (currently only available in Japanese) implies the team did much more.
Speculation, based on the translated transcription of the Iwata Asks episode, is that Retro Studios was tapped to develop classic courses found in the Nintendo 3DS-exclusive title, while Konno's EAD Group No. 1 development team focused on new courses. Throughout the interview, which included a number of staffers from Retro and Konno's division, both sides complimented each team's efforts on the latest version of Mario Kart.
A translated version of the latest Iwata Asks is expected soon. Mario Kart 7 launches for the Nintendo 3DS on December 4.