Three-way tie-up could have been one-sided

Roland Jones Business news editor • Profile • E-mail

The decision by General Motors, Nissan and Renault to terminate discussions about forming a global automaking alliance reflects the conclusion of GM executives that any alliance would have been heavily weighted in Nissan’s favor, analysts said Wednesday.

A three-way alliance of the automakers was first proposed in the summer by billionaire investor Kirk Kerkorian, who owns nearly 10 percent of GM. A vocal critic of GM’s board, Kerkorian was reportedly impatient with the pace of GM’s turnaround plan and pushed for the partnership in an effort to help the world’s biggest automaker reverse its declining market share and mounting losses.

But the three companies announced Wednesday that they have cut off discussions after GM asked Renault and Nissan to provide monetary compensation as part of any potential link-up, the companies said.

GM executives argued that the company deserved the payment because if Renault and Nissan acquired a significant stake, GM would be prevented from joining any other alliances. But Renault and Nissan, which are already linked through a cross-ownership deal, said they believe compensation would be “contrary to the spirit of any successful alliance.”

News that the deal is off wasn’t surprising, said Efraim Levy, an automotive analyst at Standard & Poor’s.

“I and many others did not really expect any significant development to come out of the talks,” he told CNBC Wednesday. “It’s more of an obligatory response by (GM Chief Executive Officer) Rick Wagoner. I don’t think he had much enthusiasm for the deal, but with Kerkorian pushing for it he had to at least consider it.”

Now that talks of a GM alliance are off the table, Nissan and Renault is free to pursue another partner, possibly Ford Motor Co. The struggling No. 2 U.S. automaker has not had as much success with its turnaround plan as GM and so may make a better candidate for an alliance.

“Everyone has said all along that there is a better fit with Ford,” said George Magliano, director of automotive industry research at Global Insight. “Nissan is looking for more production capacity in North America to support their long-term aggressive sales plan, so whether it is Ford or GM doesn’t really make a difference.”

Michael Robinet, automotive analyst at research company CSM Worldwide, said it would be better for Carlos Ghosn, chief executive of both Nissan and Renault, to step back and analyze where the company is going.

Ghosn shouldn’t “just pick up the Batphone and call another manufacturer,” Robinet said on CNBC Wednesday. “That would almost look desperate.”

The collapse of the talks reflects the fact that the benefits of any alliance would have been weighted heavily in Nissan’s favor, said Kevin Reale, research director for AMR Research, an industry consulting company.

“When this was first announced, it sounded like good news for both companies, but when you started to go through the details you realized the biggest opportunities were on Nissan’s side,” Reale said.

Ghosn said last month in Paris that the three carmakers could reap as much as $10 billion in savings by working together, but most of that benefit likely would have fallen to Nissan, said Reale.

“GM spends some $86 billion on automotive components and raw materials each year, while Nissan-Renault spends far less,” he said. “So how much more of Nissan’s buying power could have influenced better prices on things like steel? It might have helped, but an alliance would have helped Nissan more because they could have tapped into GM’s superior purchasing power and supply chain.”

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