• Oct 4th 2006 at 2:43PM
  • 28
UPDATE: They Speak! Official release addressing dissolution of talks after jump.

We're now awaiting official word from Renault (it came, see after jump) concerning the break off of talks between the automaker, its alliance partner Nissan, and General Motors. While we're waiting, we thought you'd be interested in a few more details that are perhaps pertinent to figuring out why these three-month long exploratory talks ended abruptly with less than two weeks to go.

The WSJ reports that GM chief Rick Wagoner and head of Nissan and Renault Carlos Ghosen spoke on the phone this morning and agreed the two sides were not seeing eye-to-eye on the value of an alliance. GM basically put the question to the other side, "What's it worth to you?"

The largest single sticking point seems to be GM's demand that Nissan-Renault pay a "control premium" if it purchased 20-percent of the General's stock. GM believed that since Renault-Nissan would make out like a bandit if such an alliance were to happen, that the Franco-Japanese automaker should make a lump payment to GM to make up the difference and equalize everyone's interests. The two sides couldn't come to an agreement on how much additional coin Renault-Nissan should cough up for the pleasure of doing business with GM, so that's when the party ended.

Yesterday GM gave us a big indication that the alliance wouldn't happen when the board of directors made amendments to the company's bylaws that will make it difficult for a single shareholder to rally other shareholders and influence management. That's exactly what billionaire investor Kirk Kerkorian did to start this whole GM/Renault-Nissan business, and yesterday the board made it so that such a move by a single share holder would be much more difficult in the future. Clearly GM management did not appreciate being manhandled into this situation, which probably spelled its doom from the get-go.

In the end, this whole business seems to have turned out to be a big waste of time. Though Mr. Kerkorian believed he was acting in the best interest of the company in which he owns a 9.9-percent stake, perhaps he should sit down now and let the real auto executives do their jobs. GM is beginning to finally show signs of life and distractions are the last thing its management needs.

[Source: WSJ, Detroit News, Reuters]

Press Release:

General Motors, Renault And Nissan Terminate Alliance Discussions


General Motors, Renault and Nissan said today that they had agreed to terminate discussions regarding a proposed alliance among the three companies.

The parties mutually recognized that significant aggregate synergies might result from the alliance. However the parties did not agree on either the total amount of aggregate synergies or the distribution of those benefits.

Based on its conclusions, GM had proposed that Renault-Nissan provide compensation as part of a potential alliance and for potentially precluding GM from entering other alliance opportunities if Renault-Nissan had made a significant investment in GM.

Renault and Nissan consider that the principle of compensation is contrary to the spirit of any successful alliance.

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    • 1 Second Ago
      • 8 Years Ago
      As stated above, Carlos didn't fix Nissan with better cars, he fixed accounting errros and beat up suppliers on price and forced them to source parts overseas, which will have an adverse affect down the road.
      In my humble opinion, the only good that GM could have taken away from Nissan is their new 3.5L V6.
      • 8 Years Ago
      #4 SherbornSean

      If GM wants cohesion the first thing it needs to do is to get rid of all the brands except Chevy, Cadillac and GMC.

      Then make a strong pitch to make both Chevy and Cadillac global brands.
      • 8 Years Ago
      Let's see. Nissan is using Toyota's hybrid system next year. GM co-developed but can use their system anyway they want. GM is so advanced in hydrogen fuel technology that Toyota wanted to steal, I mean, work with GM on it and did.

      Yes, GM is at an advantage and wanted to even things out. Yes, Nissan is behind GM.

      GM has the capacity probably in 75% of the places Nissan would want to build especially America.

      You guys are way too blind to see.
      • 8 Years Ago
      I do not understand why GM has to act like a prostitute.

      Give me a fat tip or else I am not going to show you the trick.

      I do not understand why GM cannot cooperate with others and contribute to the society. Thats a very bad attitude.
      • 8 Years Ago
      Is it just me or does Ghosn look like Mr. Bean?
      • 8 Years Ago
      Duh, of course the talks failed. Kirkorian made GM enter talks in which it didn't want to participate. Kirkorian wants Waggoner gone and Waggoner wants to stay.

      Kirkorian doesn't want to do what's necessarily "in the best interest of the company". Kirkorian wants to make profit on his shares, pure and simple, and that includes short-term rises in share value that may do nothing, or even harm, long-term share values. I suspect if there's somehow a major spike in GM's shares, i.e. by a Renault/Nissan &GM alliance, then Kirkorian sells as fast as the SEC rules allow.
      • 8 Years Ago
      Nothing went wrong here. In fact everything went right! :)

      Capn Kirk forced GM to investigate a possible "merger of equals" (Yeah, right. Where have we heard that one before?). Wagoner was in the midst of his monumental turnaround effort and couldn't afford the distraction, but he did oblige Kirk and pulled the old govermental ruse of forming a committee to placate the old geezer.

      Of course, there was never any intention of forming any alliance with R-N. Amusingly the board's decision to forego the alliance was uninanmous (and that includes Jerry York, Kirk Kerkorian's hip pocket on the board) So, Hip hip hooray! We won!

      It might be worthy to note that GM would have returned a hefty profit last quarter if it weren't for the current restructing charges. Thanks to Rick Wagoner, GM is well on the road to recovery and doesn't need anyone else to mess up the works.

      Perhaps Kirk should sell his stake in GM and buy Ford or R-N instead? Afterall he has already made a profit on his GM holdings (a minor one; but there is little hope of him grabbing the whole enchilada now). Rick Wagoner is in charge. The board likes it that way. And now Kirk has to play by Rick's rules from now on. It will be interesting to see how long Cap'n Kirk remains onboard.
      • 8 Years Ago
      Carlos Ghosn and Renault-Nissan saw the writing on the wall for the money pit that is General Motors. Ghosn knows better than to buy an alcoholic another drink, and GM's alcohol is money, and their abuse if it. Run Renault-Nissan, before you too get sucked into the black vortex that is GM, like SAAB and Daewoo.
      • 8 Years Ago
      "GM is so advanced in hydrogen fuel technology that Toyota wanted to steal, I mean, work with GM on it and did."

      If you can believe this you can probably fool yourself into believing you actually have 1/10th of a human idiot's brain.
      • 8 Years Ago
      Its good that this didn't go through since I don't think it would have been beneficial to GM. Nissan themselves appear to be slumping in sales. It does seem like GM is improving its product line somewhat and the new warranty is a step in the right direction. The expansion of the Hummer line seems like a good idea. The new Camaro is sure to be a hit. I haven't bought an "American" car since 1991 but that may change in the future. My past gripes with GM were that their products refreshes were coming out too late.

      I don't think any company right now can touch Toyota in sales. I don't even understand how Lexus manages to beat BMW and Mercedes. No ones going to be able to stop Toyota at this rate.
      • 8 Years Ago
      GM needs to pull its strengh from within. Nissan and Renault merger would ruin GM in my opinion.

      GM has bent over backwards and cooperated with others much to its own detriment.

      GM has worked with Toyota its biggest competitor. Isuzu, Susuki many others.

      GM needs to just be GM and improve its name and image.

      The bias and rhetoric displayed against GM here, is sickening.
      • 8 Years Ago
      If the co-developed hybrid system doesn't pan out GM still has the light hybrid which is all theirs and the one SAAB is building too.

      Nissan is no different than Ford in the hybrid arena and will probably be complaining about not get enough deliveries like Ford was a bit ago.

      At this snapshot in time, GM is in much better position than Renault/Nissan.

      I'm glad it didn't happen. Sure there will be those that point the finger if GM does not succeed but I know it won't be because they didn't get into a one way transfer with Renault/Nissan.

      I would of made them pay and no stock exchange, f that. Fiat got a couple billion from GM and I don't think that GM got any ownership, isn't that correct?
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