- The Washington Times - Wednesday, October 4, 2006

4:31 p.m.

DETROIT — General Motors Corp., Renault SA and Nissan Motor Co. said today that they have cut off discussions about forming a three-continent automotive alliance after GM sought compensation for its participation.

“The parties mutually recognized that significant aggregate synergies might result from the alliance,” the three companies said in a joint statement. “However the parties did not agree on either the total amount of aggregate synergies or the distribution of those benefits.”

GM had proposed that France’s Renault and Japan’s Nissan, which are already joined in an alliance, provide compensation as part of a potential linkup, the companies said.

The reason for that was twofold, GM spokesman Brian Akre said. First of all, GM wanted payment because it believed it would have benefited from the alliance far less than Renault and Nissan would have, Mr. Akre said.

In addition, an alliance could have prevented GM from teaming up with other companies, and the automaker felt it should be compensated for giving up those potential opportunities, he said.

GM also argued that if Renault-Nissan acquired a significant stake in the U.S. automaker, GM would be prevented from joining any other alliances.

But Renault and Nissan believe compensation would be “contrary to the spirit of any successful alliance,” the companies said.

GM shares fell 19 cents to $33.22 in afternoon trading on the New York Stock Exchange.

GM is the world’s largest automaker but has been losing market share at home to more fuel efficient vehicles from Asian rivals. It is also at a disadvantage to Asian automakers because of large accumulated pension and health costs.

It lost more than $10.6 billion last year but has said a restructuring program that includes massive job cuts and plant closings is already starting to pay off.

The announcement came ahead of an Oct. 15 deadline that the two sides had set for evaluating the proposal and a week after GM Chairman and Chief Executive Rick Wagoner and Renault-Nissan CEO Carlos Ghosn met face to face in Paris. Afterward, GM officials voiced skepticism about the proposed linkup, saying Renault-Nissan stood to benefit more than GM.

The idea to join the alliance has been promoted by billionaire investor Kirk Kerkorian, who owns a 9.9 percent stake in GM. After Mr. Wagoner’s meeting with Mr. Ghosn, Mr. Kerkorian turned up the heat by announcing he might increase his stake in the company. He also called for an evaluation of the alliance proposals by independent advisers.

Kerkorian’s Tracinda Corp. said today that it was disappointed about the end of the alliance talks.

“We believe that General Motors’ participation in a global alliance with Renault and Nissan would have enabled GM to realize substantial synergies and cost savings,” Tracinda spokeswoman Carrie Bloom said. “We regret that the board did not obtain its own independent evaluation of the alliance.”

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