GM and Renault-Nissan Alliance Review to Take About 90 Days

Strategic Insights -

The CEOs of General Motors and the Renault-Nissan alliance, Rick Wagoner and Carlos Ghosn, have agreed to a 90-day review of a potential partnership between the three companies. This move comes after an initial meeting in Detroit and letters from billionaire investor Kirk Kerkorian urging the companies to explore a partnership. Kerkorian, who owns 9.9 percent of GM shares, believes a three-way alliance would return GM to profitability.

The companies cited the need to let their teams work on the review without distraction, and therefore will not provide further public comments at this time. However, bondholders and analysts are urging a speedy decision, given GM's recent financial struggles. A potential alliance could include Renault and Nissan purchasing a combined 20 percent stake in GM.

Key Takeaways:

  • The review of a potential GM-Renault-Nissan alliance will take about 90 days.
  • The alliance would involve Renault and Nissan purchasing a combined 20 percent stake in GM.
  • GM's CEO, Rick Wagoner, is under pressure to consider the alliance, given the company's recent $10.6 billion loss and declining US market share.
  • The alliance could include GM helping Nissan with SUV design and low-cost car designs in China, while Renault could provide GM with expertise in five-passenger minivans in Europe.
  • A potential alliance could undermine Wagoner's authority and compel him to step down.
  • Analysts like Pete Hastings at Morgan Keegan believe an alliance could be a positive development for GM, while others, such as Andrew Harding, are more skeptical.

Statistics:

  • 90 days: The duration of the review of the potential GM-Renault-Nissan alliance.
  • 9.9 percent: The percentage of GM shares owned by billionaire investor Kirk Kerkorian.
  • 10.6 billion: GM's loss last year.
  • 80-year low: GM's market share in the US.
  • 20 percent: The combined stake that Renault and Nissan may purchase in GM.
  • $16 billion: The amount of assets managed by Andrew Harding's company, Allegiant Asset Management.

Sources:

  • Wagoner and Ghosn statement
  • Tracinda's proposal
  • Xavier Mosquet, Boston Consulting Group
  • Andrew Harding, Allegiant Asset Management
  • Pete Hastings, Morgan Keegan