Nissan, Renault wait for GM reply 04/07/2006 00:00

PARIS, July 4, 2006 (AFP) - Prospects for creating a king-of-the-road auto group hung Tuesday on a reply from General Motors to interest from Renault and Nissan in a three-way alliance to get GM back on track and face up to Toyota.

Uncertainty overshadowed the proposal however, with some saying it had been floated by billionaire US investor Kirk Kerkorian merely to push GM chairman and chief executive Rick Wagoner into greater restructuring at the troubled US giant.

Kerkorian owns 9.9 percent of GM's shares, and his idea of talks with Carlos Ghosn, the chief executive of Nissan and Renault, on joining their partnership was approved by the Renault and Nissan boards on Monday.

It was not known when GM would respond, and spokeswoman Geri Lama said only that "the board has taken the proposal under advisement (consideration)."

In Paris, junior industry minister François Loos said Tuesday that a deal would have to be approached "with a great deal of caution because the United States is an immense and complicated market" that Renault had unsuccessfully tried twice to break into.

General Motors is in serious trouble. It is losing market share to Japanese manufacturers, and notably Toyota, it has huge debts and pension fund liabilities, and lost more than 10.6 billion dollars (EUR 7.9 billion) last year.

A tie-up would underpin GM's position as the world's leading automaker, a rank it could soon lose to Toyota, which has made huge inroads into the US market.

An alliance would also put pressure groups such as DaimlerChrysler, Toyota and Ford to consider alliances of their own, one analyst said.

Toyota achieved record first-half results in the United States where it has been selling vehicles for 49 years, and is now considering building its eighth plant in North America.

The industrial logic of a GM/Nissan/Renault deal focused on achieving economies of scale by developing common vehicle platforms and consolidating the purchase of parts and materials to get better prices.

A Paris-based analyst who did not want to be named said: "The goal is to create opportunities and synergies and develop geographically."

At the German bank HVB, analyst Georg Stuerzer said: "As we do not believe that DaimlerChrysler will sit on the sidelines watching the main competitor improving its cost base, a potential GM/Renault/Nissan deal would trigger a new round of consolidation in the industry."

But such as deal was far from finalised on Tuesday, with Loos saying: "I have confidence in the capacity of the Renault-Nissan alliance but by the same token it must be very cautious."

The French state owns 15.33 percent of Renault, slightly more than Nissan, which holds 15 percent of the French group's equity.

Renault holds a 44.4-percent interest in Nissan, and the Japanese press agency Kyodo said they might together acquire 20 percent of GM if a deal went through.

But Ghosn could be taking on trouble, in view of GM's losses and because Renault is still in a restructuring program that is to last until the end of 2009.

General Motors has already announced plans to cut 30,000 workers in the United States and to close several plants in the face of stiff competition from Japanese auto makers.

They pose the biggest threat and a possible solution, since Ghosn is widely credited with orchestrating a spectacular turnaround at Nissan.

At Bank of America, analyst Ronald Tadross said Monday that a three-way alliance was "more likely than not to happen" given Ghosn's track record.

The deal "would equate to a positive management infusion that could yield short-to-medium term benefits," he said.

In France however, analysts warned the Nissan/Renault chief not to bite off more than he could chew.

Credit Agricole Cheuvreux analyst Bruno Lapierre said: "Renault really needs his presence to rebound and act on his plan."

In February, Ghosn unveiled the "Renault Contract 2009" aimed at making the group the most profitable in Europe, with the launch of 26 new models, including 13 developed from scratch.

Copyright AFP

Subject: French News