What's At Stake In The GM , Nissan, Renault Alliance
Thursday, July 13, 2006PAUL KANGAS: All eyes will be on Detroit tomorrow when the chief executives of General Motors, Nissan and Renault sit down for the first time to discuss a potential alliance. A partnership between the three companies would be a landmark achievement. But as Diane Eastabrook reports, many doubt that such a deal can be made.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: During an appearance in Washington today, General Motors Chairman and CEO Rick Wagoner was open to a GM-Renault-Nissan alliance.
RICHARD WAGONER, CHAIRMAN & CEO, GENERAL MOTORS: Both parties need to sit down and figure out what are the key elements and does that create value, appropriate value for the other side.
EASTABROOK: Analysts say, in theory, a linkage could provide cost savings for American GM, Japanese Nissan and French Renault. The three could save money by cooperating on research and development, purchasing supplies, and consolidating back office functions. But experts say in practice, the benefits are questionable.
JOHN NOVAK, AUTO ANALYST, MORNINGSTAR: When you start to look at the numbers and the practical realities of achieving those synergies, it will be much more difficult, and the upside may not be as great as it initially seems.
CARLOS GHOSN, CEO, NISSAN & RENAULT: If you get it right for the U.S., you are sure to get it right for many other countries.
EASTABROOK: Carlos Ghosn, the charismatic CEO of both Nissan and Renault, could help reverse the fortunes at GM the way he did at Nissan and is trying to do at Renault. That is why Kirk Kerkorian, the billionaire investor who owns nearly 10 percent of GM`s stock, proposed the three-way alliance. Ghosn dramatically cut costs at Nissan and rolled out exciting products. While GM has made progress cutting costs by closing plants and eliminating jobs, it is still struggling to build vehicles Americans want to buy. Analysts say Ghosn could help GM develop those new products, but they also think he could hinder its restructuring.
NOVAK: Bringing in a new personality into the mix, especially someone from outside the United States who currently operates nonunion plants in the U.S., definitely poses some risks. JAMES SCHRAGER, MANAGEMENT PROFESSOR, UNIVERSITY OF CHICAGO: Doing something wrong is better than doing nothing. Do something.
EASTABROOK: Management Professor James Schrager admits an alliance may not work, but he credits Kerkorian with trying to shake up the management and the culture at GM.
SCHRAGER: Kirk Kerkorian is in there for several reasons, none of which is to be a master auto strategist, which he is not. But he is there to show his bet on GM is right. He`s there to get the stock price in a different range and he`s there to get something changed. And on some of those bases, he`s doing the right thing.
EASTABROOK: Wagoner says an alliance with Renault and Nissan would have to benefit both General Motors and its shareholders, and experts say it will take at least a few months for GM to make that assessment. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.
