General Motors Abandons Talks with Renault and Nissan

Strategic Insights

Oct 4, 2006 — 1 min read

The talks between General Motors (GM) and the Renault-Nissan alliance have collapsed after failing to reach an agreement on share price premium and cost savings. The decision came after a long board meeting at GM, where the directors decided they couldn't allow the Renault-Nissan alliance to take a 20% stake in the company without compensating for the restrictions on alliances. GM chairman and CEO Rick Wagoner called Renault-Nissan chief executive Carlos Ghosn to end the talks, which had been ongoing for several months. The collapse of the talks clears the way for GM's arch-rival Ford Motor to open negotiations with Renault-Nissan.

Key Takeaways:

GM ended talks with Renault-Nissan after failing to agree on a 20% stake in the company, which would have made Renault-Nissan the largest shareholder.
GM wanted compensation for the restrictions on alliances and the tilt in cost savings towards Renault-Nissan, which would have seen "billions of dollars" more benefits.
Carlos Ghosn rejected the idea of compensation, citing that it was "contrary to the spirit of an alliance."
A joint statement from the three companies confirmed they couldn't agree on the benefits of a deal or how to split them.
The collapse of talks marks an expression of confidence by GM directors in Rick Wagoner's plan to recover from a disastrous $10.6 billion loss last year.
Renault-Nissan expressed interest in adding a North American partner, with Carlos Ghosn repeating his interest during the Paris motor show last week.
A deal with GM would have created a motor behemoth with a quarter of global car sales and a combined purchasing budget of $125 billion.

Statistics:

GM's loss last year: $10.6 billion
Estimated "billions of dollars" in cost savings benefit for Renault-Nissan
Combined size of global car sales with a GM-Renault-Nissan alliance: 25%
Combined purchasing budget of GM-Renault-Nissan: $125 billion
Paris motor show attendance: Not specified in the source material

Sources:

The Times
People close to the situation
Joint statement from General Motors, Renault, and Nissan

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