Analysis of a Possible GM, Nissan, & Renault Alliance
Friday, June 30, 2006SUSIE GHARIB: General Motors` shares were in overdrive today, up $2.35 or almost 9 percent to $29.79. Behind the rise, word that the company`s largest shareholder, billionaire investor Kirk Kerkorian`s Tracinda Corp., is urging GM to join a three-way alliance with Japan`s Nissan Motor and France`s Renault. In exchange, those auto makers would each buy a minority stake in GM. Nissan and Renault confirm they were approached by Kerkorian and Tracinda and say they are open to the idea, but that GM will have to make the next move. GM would only say its board will take the matter under advisement. A Detroit trade magazine says GM called an emergency meeting of its board today to weigh the Nissan-Renault partnership. GM would not comment on that report. Joining us now for more analysis of this possible partnership, John Casesa, president of Casesa Strategic Advisors, a New York consulting firm. Hi, John.
JOHN CASESA, PRESIDENT, CASESA STRATEGIC ADVISORS: Hi, Susie.
GHARIB: Does a GM-Nissan-Renault alliance make sense to you?
CASESA: I think there is some long-term investor logic. Nissan is a company that would like to be bigger in North America. Nissan in turn could offer General Motors access to Japan, which is impossible without a Japanese partner. And collectively this could be a very big force in the global auto industry.
GHARIB: Do you think that Nissan and Renault can really bring additional quality and technology to General Motors as well as cost savings?
CASESA: Well, look, I think that`s looking very far ahead. I think in the long run the answer is yes. But I think right now there`s two or three things that are interesting about this development. One is that, you know, it`s a serious development. I think Tracinda released this letter because it is for real; it is not a bluff. Secondly I think it is just too early to tell what form the operational partnership would take. And then thirdly, even if there is no deal, at the very least what this development does is increase the pressure on GM management to accelerate the change at the company. It is -- it is in a way a sign of impatience of the company`s largest shareholder.
GHARIB: And it also increases the pressure on CEO Rick Wagoner. As you know there has been a lot of talk and rumors about his tenure at the company. And there has been speculation that it is going to take an outsider who can really overhaul General Motors. Is Carlos Ghosn of Nissan the man for the job, if this deal goes through?
CASESA: This is an extremely difficult job. And I think despite Wagoner`s considerable accomplishments in recent months, the development tells that you there is not unanimity on the board for this to be public. Now even if a deal is done, it doesn`t mean that Gone would run this alliance. I think for some time Gone and Wagoner would be partners in this. Eventually one CEO is going to have to run the whole group. And I would say in the long run, which could be quite a ways from now, Gone would be very well positioned to do it. He`s got a great track record at Nissan. And I think he would get a lot of support from investors.
GHARIB: Is GM stock a buy at $30 a share? CASESA: I`m not in the stock business any more. I used to be, but I think if you look at what some analysts are saying like my successor at Merrill Lynch, John Murphy, this company right now is exceeding what had been very low expectations. It`s downsizing rapidly. It`s taking heads out. And I think today`s development is quite positive for shareholders. This is something that tells there is an activist shareholder pushing an aggressive agenda for restructuring.
GHARIB: How do you think this whole thing is going to play out with or without the alliance?
CASESA: Well, I --
GHARIB: What is the future for GM? Is it going to be able to reinvigorate itself?
CASESA: I think one certainty is that GM won`t have to undergo a much more radical restructuring than it has already even begun. What it has done so far is just resize itself. The next thing it has to do is restructure, change the company, streamline the brand portfolio, consolidate the dealer network and then finally step three is reinvest in what`s left. And so I think we are only at step one. Step two and three are ahead. My guess is that this will happen outside of Chapter 11 because I think the union will cooperate. But you never know. And whether Renault is in the picture or not, these things have to happen in GM in North America for it to be competitive.
GHARIB: All right. We will have to check in with you again and see how things play out. Thank you so much, John, hope you have a nice weekend.
CASESA: Thanks, Susie.
GHARIB: We`ve been speaking with John Casesa, president of Casesa Strategic Advisors.
