GM, Nissan to review pact within 90 days

DETROIT: General Motors, Renault and Nissan Motor agreed on Friday to review the benefits of a potential alliance that could change the world auto industry.

The decision to devote the next 90 days to a study of the potential savings from a tie-up follows a widely awaited dinner meeting on Friday in Detroit between GM CEO Rick Wagoner and Carlos Ghosn, CEO of both Renault and Nissan.

The meeting came two weeks after GM’s largest individual shareholder, billionaire investor Kirk Kerkorian, went public with his bid to broker a sweeping alliance that would see Renault and Nissan take a substantial stake in GM. Renault and Nissan already hold stakes in each other.

Mr Ghosn and Mr Wager said working-level talks were expected to focus on areas such as pooling purchasing of parts and sharing vehicle platforms which would get underway now, allowing both sides to evaluate the benefits of a deal by October.

“We had a good discussion today, and are looking forward to having our teams work together to explore our ideas,” Wagoner and Ghosn said.

“It is important to let our teams work on this review without distraction and, therefore, we will not be providing further public comments at this time.”

Ghosn told reporters earlier that a deal would only succeed if all sides would benefit. “If not, we will shake hands and return to our battlefield,” he said at a Nissan facility in Detroit.Analysts fear a tie-up might not produce the cost-savings Kerkorian has suggested and could threaten to distract both CEOs at crucial times for their respective companies.Wagoner has said this week that GM, the world’s largest automaker by sales, was not relying on a white knight to rescue it from its deep-seated problems.

GM lost $10.6bn in ‘05 as it struggled with high labour costs, sluggish sales of profitable sport-utility vehicles and loss of US market share to foreign rivals.

Under Wagoner, GM has moved to sell assets and slash its hourly work force by 35,000 workers as part of a cost-cutting plan expected to capture about $5bn in savings this year.

In response, GM shares have gained almost 46% since the start of the year, bringing Mr Kerkorian closer to profitability on his 9.9% stake in the company.

“We have a good plan, we’re turning the business at a rapid rate,” Wagoner told reporters on Thursday. “So we’re going to be in a position to be a very successful business.”

Mr Ghosn, highly regarded for his success in turning around Nissan, Japan’s No 2 autos firm and the world No 7, has tried to defuse several areas of potential tension with GM management and workers. Renault is the world’s 10th largest automaker.

Mr Ghosn repeated on Friday that he had no intention of taking the top job at GM, a prospect some analysts see as Mr Kerkorian’s aim in first approaching Mr Ghosn at a mid-June dinner.

“It’s not serious,” he said of the suggestion. “I’m not interested in his job. I’m interested in and responsible for Nissan and Renault development and results.”

In a move that could ease potential union opposition, Mr Ghosn has also suggested Nissan could take over some of the excess production capacity GM is planning to shed in North America.

That would cushion the blow as GM looks to close 12 plants and heads into a crucial round of contract talks with the United Auto Workers union where it is expected to seek concessions on costly benefits.

Mr Ghosn has said that he wants a broad partnership with GM if there is to be any deal at all, including a deal where his companies take a “big” but unspecified stake in GM.

Mr Wagoner said on Thursday he wanted to get a “clear understanding” of what Mr Ghosn expected and to convey GM’s priorities.Analysts remain sceptical.“We believe an alliance between Renault-Nissan and GM is set to fail the test of generating enough synergies quickly enough to make it worthwhile, particularly for GM,” Commerzbank analyst Philip Watkins said in a research note.

Analyst Kevin Tynan of Argus Research agreed: “I think Mr Wagoner is going into it a little more sceptical. He and his team are a little bit more confident now in the work they’ve done and they’ve said publicly they don’t need a distraction right now.”