GM board asks Wagoner to explore Nissan-Renault alliance
10 Jul 2006
The board of General Motors has asked the company management to explore potential areas of cooperation and alliance with Nissan Motor of Japan and Renault SA of France. The decision follows a move initiated by Kirk Kerkorian, owner of Tracinda Corp which holds 10 per cent of GM, and endorsed by the boards of both Nissan and Renault.
It is expected that Rick Wagoner, CEO of GM, and Carlos Ghosn, CEO of both Renault and Nissan, would meet at the earliest to discuss plans and strategies of a potential alliance between the three auto companies.
Analysts expect Renault and Nissan to take a joint 20-per cent stake in GM, which would see cash infusion of more than $3 billion into GM. If formalised, the alliance would have combined capacity of nearly 15 million units per annum and would control nearly 25 per cent of the global auto markets.
Though the GM board spokesperson said it continues to support CEO Wagoner's turnaround strategy for the company's North American operations, an alliance with Nissan-Renault may force Wagoner exit from GM. Wagoner is implementing major cost cutting and restructuring exercises at GM, aimed at reducing more than $10 billion in losses reported last year.
Even as talks with Nissan-Renault are initiated, GM would proceed with its attempt to sell its finance division. The company could net nearly $14 billion by selling the profitable division. GM is also trying desperately to prevent labour unrest at its major component supplier, Delphi. Production problems at Delphi, which used to be a GM subsidiary, would disrupt GM's output seriously.
Meanwhile, Tracinda has welcomed the decision of GM's board to initiate discussions with Nissan-Renault. In a statement, the investment company called for the setting up of a board committee to study the proposals.
