GM to enter alliance talks with Renault and Nissan

GM to enter alliance talks with Renault and Nissan

(Monday, July 10, 2006) General Motors will enter "exploratory discussions" with Renault-Nissan on a potential alliance, the U.S. automaker said Friday following a board meeting. GM cautioned the discussions were preliminary and non-binding and that implementing its massive restructuring program remained the automaker’s "top priority" French car maker Renault welcomed GM's decision to discuss the possible alliance first proposed last week by the U.S. automaker's largest private shareholder, Kirk Kerkorian's Tracinda Corp.

"Following GM's board decision, we look forward to starting the discussion process soon," Renault said in a statement issued in Paris. GM chief executive officer Rick Wagoner will lead the discussions and has already arranged to meet with Carlos Ghosn, the chief executive officer of Renault-Nissan, the American automaker said. 'We periodically receive interesting proposals and we owe it to the company and its shareholders to explore how they might work, and to objectively weigh the potential benefits and issues that each might present.' Wagoner said in a statement. "That is exactly what we recommended to the GM board in this specific case, and exactly what it has agreed we should do" Wagoner contacted Ghosn before the proposed alliance was made public June 30, a GM spokeswoman told AFP. although she would not confirm reports that a meeting was set for July 14. Reports have circulated in Detroit that Wagoner and other GM top executives are opposed to the idea of a merger, despite the interest expressed by Renault-Nissan and the warm welcome issued by the stock market.

Hints of caution were evident in Wagoner's statement. "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," he said. "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." Tracinda issued a statement which belied some doubts as to Wagoner's openness to the deal. These talks are "a good first step," Tracinda said in a statement. "but a full and objective evaluation of this unique opportunity will require establishment of a board committee that receives independent financial and legal advice."

While news of the potential alliance has given GM shares a massive boost last week, some analysts said it may not result in long-term gains. Dennis Virag, head of the Automotive Consulting Group in Ann Arbor, Michigan, said GM's decision to study the proposal was prudent. "They have a fiduciary duty to look at the proposal," he said. "But in the end I don’t see those two getting together They're both troubled companies in a way. They both have significant internal problems they have to address before they take on outside issues" General Motors remains focused on implementing a massive restructuring program that involves the shuttering of 12 plants and the elimination of 30,000 jobs. Wagoner is battling to restructure the U.S. car giant following its loss of US$10.6 billion last year.

Joseph Szczesny, Agence France-Presse (Detroit, Michigan)