GM-Renault/Nissan Alliance is over
Renault, Nissan, and GM terminate Alliance Discussions
source: Renault, & General Motors; DETROIT, BOULOGNE-BILLANCOURT, TOKYO, October 4, 2006
General Motors, Renault, and Nissan issued a joint press release, stating that they have agreed to terminate discussions on the three-way alliance. to terminate discussions regarding a proposed alliance among the three companies.
The parties mutually recognized that significant aggregate synergies might result from the alliance. Howe’ver 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.
In a webconference, held in Detroit, MI on October 4, 2006, Rick Wagoner, CEO, General Motors said that “the synergies were in favor of Renault-Nissan.”
Wagoner said that “this agreement would have precluded General Motors from other alliances without adequate compensation. It would have the potential to disrupt the turnaround efforts. On Monday evening and Tuesday, we had the opportunity to review the synergy study in detail with the GM board, as well as other key aspects of the Renault-Nissan alliance model.”
“In addition to the synergy projects, under the Renault-Nissan alliance model, they would acquire a substantial block of GM common stock at market price, along with preferential rights that could preclude GM from entering into other automotive alliances.”
“Renault-Nissan made it clear they would not pay any market premium, nor compensate GM to balance the disproportionate impact of expected synergies, nor for potentially precluding other alliances. They offered us the right to acquire stock in their companies, as well.”
Most surprisingly, Wagoner said that the decision was backed by the entire board, with all board members being in attendance. The reference was to Jerry York, a representative for Kerkorian’s Tracinda group.
Wagoner said that General Motors and Nissan-Renault were open to working on specific projects, “We did advise Renault-Nissan that we were very open to the idea of further exploring, and eventually implementing, individual synergy projects that are mutually beneficial. At this point, our understanding is that we will not be proceeding on this basis.” General Motors and Renault have a light vehicle in Europe that is a joint venture.
Insiders say that GM wanting a partner is not out of the question, but not one slammed down their throat by a guy, they say, that buys and sells stock to make money.
There are two types of shareholders and two types of CEOS. You either go in for the long run to make a profit or you go in and parse the company and sell.
Kerkorian is the latter. Had Warren Buffet been the stockholder would he have suggested Carlos Ghosn and Renault-Nissan? Possibly, but Buffet has a different reputation and there may have been a different outcome in mind. This story is not finished yet.