What went wrong? Analysis of GM/Renault-Nissan talks
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
DETROIT, BOULOGNE-BILLANCOURT, TOKYO, October 4, 2006
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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Reader Comments (Page 1 of 2)
Steve 2:51PM (10/04/2006)
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.
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GM WHO? 2:57PM (10/04/2006)
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.
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Ryan 2:58PM (10/04/2006)
They are whores!
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SherbornSean 3:02PM (10/04/2006)
Steve,
GM only entered into talks with Ghosen because its largest shareholder, Kerkorian, forced their hand. They always viewed the alliance talks as a diversion from the merger they are already in the middle of -- merging their worldwide operations into a cohesive company without redundancy.
GM is under no obligation to "cooperate with others", especially when those others are competitors. The notion that GM has a bad attitude or that it doesn't contribute to society is irrelevant.
You heard it hear first: Ford will jump at the chance to ally with Renault/Nissan and will announce the merger of its European operations with Renault before year end.
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Jamie 3:07PM (10/04/2006)
John Neff said:
"GM is beginning to finally show signs of life and distractions are the last thing its management needs.'
----------------
Is this Autoblog?
A positive comment about a domestic automaker?
What hath GM done to deserve this?
Time will tell whether or not GM is serious, but this is a humongous show of faith!
Who knew?
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Richard Warren 3:11PM (10/04/2006)
A "control premium" is fairly common in a situation like this. Contray to poular belief and autoblog postings, Nissan-Renault had far more to gain than GM did from this.
"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."
This was about 2 egos. Carlos Ghosen and Kirk Kerkorian, not what was good for both companies.
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Raging Bender 3:13PM (10/04/2006)
>> this whole business seems to have turned out to be a big waste of time
Not for Renault/Nissan : Now they can use the same (even improved) screening process for their talks with Ford.
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anahit 3:19PM (10/04/2006)
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.
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sirAQUAMAN64 3:31PM (10/04/2006)
I am very happy about this because I believe of the Big 3 GM has the most focus and dedication to turn things around. The product IS getting much better. Good on them, and I want to see credit where it's deserved.
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Lithous 3:36PM (10/04/2006)
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.
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whofan 3:41PM (10/04/2006)
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.
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Shotter 3:46PM (10/04/2006)
Is it just me or does Ghosn look like Mr. Bean?
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Steve 3:47PM (10/04/2006)
#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.
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Lithous 3:48PM (10/04/2006)
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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SherbornSean 3:56PM (10/04/2006)
Steve,
I think GM is doing exactly that. They are pushing hard for Chevy and Cadillac in Europe, even introducing unique vehicles unavailable in the US.
As far as reducing car lines, you have to read between the lines. Given all the trouble they had eliminating Olds, GM doesn't want to go through that again. By slowly combining GMC, Pontiac and Buick, they are essentially eliminating 2 car lines, without all the bad press and necessity to buy out dealers.
Hummer and SAAB are hanging on, but it isn't as if GM is investing huge bucks in them, just taking existing platforms and tweaking them to align them with the brand's mystiques.
The cohesiveness I am refering to is more on the operational side -- ensuring that all midsize FWD cars are built on the same platform, for example -- than on the retail side. This will save GM big bucks over time.
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Oscar 3:59PM (10/04/2006)
Gm products better? try the Cobalt, this thing is CRAP. You would think they would try to compete with the civic. Man that thing does not compete with a 1989 Civic. Absolute garbage.
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Delbert 4:06PM (10/04/2006)
Hooking up with Nissan and Renault would be like marrying a slut that already has herpes and HIV.
Captain Kirk doesn't give a crap aboutr cars, knows absolultely nothing about the things (makes him the equal of the vast majority of the posters here) and only wanted this "deal" as a way to boot his investment.
Carlos the crook is just about as bad.
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Jaimie B 4:07PM (10/04/2006)
"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.
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Lithous 4:28PM (10/04/2006)
Go punch out of the clock Jaime B, you know the one that has "Toyota" on it over by the door.
The funny thing is that not even 1/10 of your comments ever state a fact about why something is wrong ever. You just write stupid things that Rastus would find funny.
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rw 5:03PM (10/04/2006)
" Gm products better? try the Cobalt, this thing is CRAP. You would think they would try to compete with the civic. Man that thing does not compete with a 1989 Civic. Absolute garbage."
And your facts are based on? You better do your homework before making a statement. Here is one for you to mull over. Honda's double overhead cams are driven by a belt. This belt must be replaced on a regular service interval. Now here is your homework assignment
what does the Cobalt use?
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