GM, Nissan-Renault call off alliance talks

updated 8:15 a.m. ET Oct. 5, 2006

DETROIT - General Motors Corp., Renault SA and Nissan Motor Co. said Wednesday that they have cut off discussions about forming a three-continent automotive alliance after GM sought compensation for its participation.

“The parties mutually recognized that significant aggregate synergies might result from the alliance,” the three companies said in a joint statement. “However the parties did not agree on either the total amount of aggregate synergies or the distribution of those benefits.”

GM had proposed that France’s Renault and Japan’s Nissan, which are already joined in an alliance, provide compensation as part of a potential link-up, the companies said. GM argued that if Renault-Nissan acquired a significant stake in the U.S. automaker, GM would be prevented from joining any other alliances.

But Renault and Nissan believe compensation would be “contrary to the spirit of any successful alliance,” the companies said.

GM is the world’s largest automaker but has been has been losing market share at home to more fuel efficient vehicles from Asian rivals. It lost more than $10.6 billion last year but has said a restructuring program that includes massive job cuts and plant closings is already starting to pay off.

The announcement came ahead of an Oct. 15 deadline that the two sides had set for evaluating the proposal and a week after GM Chairman and Chief Executive Rick Wagoner and Renault-Nissan CEO Carlos Ghosn met face to face in Paris. Afterward, GM officials voiced skepticism about the proposed linkup, saying Renault-Nissan stands to benefit more than GM.

The idea to join the alliance has been promoted by billionaire investor Kirk Kerkorian, who owns a 9.9 percent stake in GM. After Wagoner’s meeting with Ghosn, Kerkorian turned up the heat by announcing he might increase his stake in the company. He also called for an evaluation of the alliance proposals by independent advisers.

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