General Motors has abandoned talks about creating a global alliance with Renault and Nissan, thumbing its nose at its largest shareholder, Kirk Kerkorian, and promising a painful go-it-alone restructuring.
Mr Kerkorian, who has amassed a 10 per cent stake in the world's largest car manufacturer and forced his own placeman on to the board, bounced GM's chief executive, Rick Wagoner, into negotiations about a tie-up in July, in the hope that the three companies could save billions of dollars in annual running costs.
But after a board meeting earlier this week, Mr Wagoner called his opposite number at Renault, Carlos Ghosn, yesterday to say they were too far apart on the merits and the potential structure of an alliance. In particular, Mr Ghosn had been resisting GM's demand that it be paid an upfront fee of several billion dollars for the deal to go ahead.
Renault and Nissan said that both sides had accepted that there could be significant cost savings from an alliance, which analysts believed would come from squeezing suppliers and sharing common technologies. However, they disagreed with GM over how big the savings might be, and which side would reap the most.
"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," they said.
Mr Wagoner said that an alliance would have been a "distraction" rather than a solution to GM's problems. "It unfortunately doesn't help in key areas like our huge US legacy cost competitive disadvantage, and could impede our fast-moving efforts to evolve to a global management system," he said.
Shares in GM missed out on yesterday's stock market rally, ending down in the wake of the news, while those of Ford jumped 4 per cent. Mr Ghosn is believed to still be keen on an alliance with a North American carmaker, to counter-balance Renault-Nissan's focus on Europe and Asia and on smaller vehicles, and industry insiders say he could now open talks with Ford.
GM has been losing market share, and losing money, in the vital American market, and 89-year-old Mr Kerkorian has argued that restructuring efforts planned by Mr Wagoner are not working fast enough. He believed that a turnaround could be speeded up by an alliance and a place on the GM board for Mr Ghosn, who has earned himself the nickname "le cost-cutter". Mr Ghosn is the wunderkind of the international car industry, a Brazilian-born Lebanese man who made his name saving a Japanese car maker from bankruptcy.
He moved from Renault to Nissan when the French company became its biggest shareholder in 1999, and was appointed chief executive of Renault last year. The GM board on Tuesday rejected Mr Kerkorian's suggestion that outside consultants should verify Mr Wagoner's calculations about the likely value of an alliance. The octogenarian investor said yesterday that he was disappointed.
Instead, the board's unanimous decision to end talks represents a vote of confidence for the chief executive at a delicate time, while he negotiates with unions to avert a strike that could cripple Delphi, GM's most important supplier.
Ford and GM have lost market share to Asian rivals, particularly Toyota.Reuse content