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General Motors, Nissan-Renault Chiefs Meet

Wednesday, September 27, 2006 (Fox News)

PARIS — General Motors Corp. (GM) will continue talks until mid-October with Renault-Nissan aimed at creating a global auto alliance, both sides said Wednesday after their chief executives met.

GM Chief Executive Rick Wagoner met on the eve of the Paris auto show with Carlos Ghosn, who heads both Renault SA and Japan's Nissan Motor Co.

"It's fair to say that we agreed that October 15 is the final date before acknowledging any alliance," Ghosn told Reuters.

A senior GM executive said Ghosn and Wagoner were likely to meet again next month, as working-level executives complete work in analyzing the potential cost-savings from a tie-up.

The Paris meeting was the first for Ghosn and Wagoner since they huddled in mid-July in Detroit and agreed to a 90-day study of a potential alliance.

Analysts have become increasingly sceptical that GM will agree to the kind of sweeping global deal that Ghosn has outlined because of the U.S. automaker's progress in recent months in cutting costs.

In a joint statement, GM and Renault-Nissan said teams at the companies were still studying "how an alliance could generate significant shareholder value for each company."

BUSINESS-LIKE

GM Vice Chairman Bob Lutz, who spoke to Wagoner after his meeting with Ghosn, said the GM CEO had characterized the session as "very business-like" with "a good tone."

The alliance talks were first urged by Kirk Kerkorian, the billionaire investor with a 9.9 percent stake in GM, who met with Ghosn this summer.

Kerkorian's investment company, Tracinda Corp., had no comment on the developing talks, a spokeswoman told Reuters.

GM, which lost $10.6 billion last year, has seen its U.S. market share fall to about 25 percent, about half of its peak from the 1970s. Largely as a result, Japan's Toyota Motor Corp.

is on track to overtake GM as the world's largest automaker by volume.

Like its Detroit-based rivals, GM has been hurt by its reliance on trucks and SUVs at a time when U.S. consumers have begun to favor lighter, more fuel-efficient passenger cars, an area of the market dominated by Japanese car makers.

But senior GM executives have said in recent days that the company would have to examine how the benefits of a tie-up would be shared and whether GM would be better off pushing ahead with its own restructuring.

Lutz, speaking at a Hummer dealership in Paris, called that a "dilemma" for GM management.

"There are synergies to be gained from an alliance with another auto company. There are also massive synergies to be gained by General Motors accelerating and reinforcing its own globalization efforts," Lutz said. "These two sort of pull in different directions. That is why this is more complicated than it seems on the surface."

'DISPROPORTIONATE SYNERGIES'

GM spokesman Tony Cervone declined to comment on specifics of the talks, but said there was "a feeling that there are some disproportionate synergies that need to be considered."

The Wall Street Journal reported on Wednesday that GM would demand billions of dollars from Renault and Nissan for agreeing to any alliance, calling that the latest sign the proposed deal was in trouble.

Cervone declined to comment on the report. Ghosn also declined to comment about any specific figures in connection with the discussions.

Thomas Leritz, a portfolio manager with Argent Capital Management, who follows the auto industry but does not own any auto stocks, said GM needed an alliance given the growing pressure from Toyota and Japan's Honda Motor Co.

"Given GM's problems, they need to do drastic things in order to survive and thrive in this market place," he said.

GM shares rose 3 percent, or 95 cents, to $32.36 near the close of trading on the New York Stock Exchange. The stock is up about 65 percent since the start of the year.

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Honestly, I don't see how this will really be benefical. Nissan is making some big mistakes right now and I believe is going to be following the path of Mitsubishi. Their newer cars are not going to go over as well because they don't have a fuel efficient option in the Altima and I guarantee those CVTs in their line-up are going to hurt Nissan even more then the initial problems Chrysler had with the ultradrives.

The only thing I can see them benefiting from each other is GM could provide Nissan with a more reliable and more fuel efficient I4. GM could use a better high tech V6 than the 3.6L. The Nissan VQ is an excellent engine.

I think GM would benefit more if they could merge with Honda. Honda has some of the best I4s in the market, their marketing and management works very well. GM could really use some of their platform technology. Honda could use GMs help at making RWD vehicles, and how to make a real luxury division because Acura isn't cutting it.