GM Opts to Continue Renault-Nissan Partnership Talks
After what may go down in GM history as one of the most important meetings ever called to order in the Detroit firm’s history, the message has come down from on high: General Motors will engage in exploratory discussions with Nissan and Renault pertaining to a potential alliance between the three.
Initially proposed by the Tracinda Corporation of Beverly Hills headed by Kirk Kerkorian, one of GM’s largest shareholders, the proposal was made public by Nissan and Renault’s boards. The proposal entailed the already-partnered Renault, France’s largest automaker, and Nissan, Japan’s second largest automaker, joining forces with GM to help resolve the struggling automaker’s issues.
“The GM Board of Directors authorized management to proceed with its plan to consider ideas the other two companies have and to weigh the potential benefits of such an alliance in order to assist the Board in its decision making,” said GM Director George Fisher. “Management will keep the Board well informed and the directors, of course, will closely monitor the process to assure that its outcome serves the best interests of all GM shareholders. The Board continues to fully support the company’s North American turnaround strategy, and we encourage management to also continue its efforts to conclude a satisfactory resolution of the issues associated with the Delphi bankruptcy and to complete the pending GMAC transaction.”
Rick Wagoner, the ex-head of GM’s North American operations will lead the talks with the willing Carlos Ghosn, the CEO of Renault-Nissan. Also the recipient of a Kerkorian-penned letter outlining the proposal, Ghosn has already expressed interest in acquiring up to 20 percent of GM’s stock, and that’s something Wagoner is taking seriously.
“General Motors has a lot of experience with different types of alliances, and some have provided significant benefits to GM’s competitive position and financial strength. We will enter into discussions with the managements of Renault and Nissan with an open mind - eager to hear their ideas of how an alliance between our companies might work to our mutual benefit. Given the complexity of any potential relationship, it has to be carefully considered on its merits before coming to any conclusion. We are committed to an objective and thorough review of that potential.”
However, as much as this sounds like a potentially GM-saving proposition, no one at GM is ready to commit prematurely, instead choosing to maintain their focus on the current turnaround plan. Implemented last year, the drastic plan has resulted in various moves that have earned the company numerous headlines throughout the year. Plant closures and idlings, employee buyouts, and sweeping management revisions have helped the giant recover somewhat from it’s reported loss of $10.6 billion USD in 2005, however, analysts have been constant in their criticism of the recovery program, maintaining that it isn’t enough.
When initially announced, the Tracinda proposal immediately raised GM’s stock value by as much as 8.6 percent, and is seen by some to be a beacon of light in an otherwise dim GM future, while many feel such a strategy would be totally unnecessary. Renault, which is currently undergoing a restructuring of its own, would only be burdened more by the addition of GM as a third leg, while some say Nissan already has all the purchasing and engineering power it needs in the current pairing with Renault.