GM and Renault-Nissan break off alliance talks

DETROIT: General Motors and Renault-Nissan have ended alliance talks after failing to reach agreement on terms of any deal, the Wall Street Journal reported on Wednesday.   

However, a GM spokesman declined to comment on the report.   

The decision came in a morning phone call between GM chief Rick Wagoner and Carlos Ghosn who heads Nissan Motor Co. and Renault SA, the Wall Street Journal reported, quoting "a person familiar with the situation".   

The two chiefs decided they were too far apart on the value of the potential alliance, the Journal said.   

GM shares fell nearly three percent following the report but shortly recovered, trading down 0.9 per cent at 33.11 dollars in afternoon trade.   

"I really don't think it's a loss for General Motors," analyst Laurie Harbour-Felax of the Harbour-Felax Group in Royal Oak, Michigan said.   

"There were some advantages for Renault and Nissan in terms of product development and capacity. But I kind of expected this. I don't see it as a huge loss for either side."    

Renault-Nissan could now seek an alliance with GM's rival, Ford Motor Co, said JP Morgan Chase analyst Himanshu Patel.   

"In many respects, Ford may be a more willing partner (family control issues notwithstanding) given that the company seems to have longer to go in its turnaround, better product cycle overlap (especially in Europe), and similar positions in key emerging markets (e.g., China)," Patel wrote in a research note.   

But there may be some competition for a Ford partnership. Wagoner hinted last week that while there were no contacts at present between General Motors and rival Ford on a possible alliance, such a deal might still be contemplated.   

"We don't have significant conversations ongoing with Ford," Wagoner declared at the Paris auto show, but added: "In this business, who knows what tomorrow brings?"   

The main hindrance to the alliance with Renault-Nissan was GM's demand that Renault-Nissan pay a "control premium" if it took a 20 per cent stake in GM as part of the alliance, the Journal reported, citing "another person familiar with the matter."   

Wagoner reportedly told the board of directors on Tuesday that the automaker had been advised to seek the control premium because such an alliance would prevent GM from making any other joint ventures.   

Both Ghosn and Wagoner believed that the alliance would result in "synergies" but they could not agree on the "payment" GM sought, the Journal reported.   

GM executives in recent days have said they wanted an "equalizing contribution" -- possibly a multibillion dollar payment -- because they believe Renault-Nissan would reap larger gains from the alliance.   

First proposed in June by GM's largest private shareholder, Kirk Kerkorian, the alliance was hailed by the market as a way to save the ailing US carmaker. Rumours soon circulated that Wagoner was not interested in the deal and was merely going through the motions of a 90-day study period which was set to end October 15.   

On Thursday, Kerkorian announced his intention to up his stake to about 10.9 per cent of the company, a move widely interpreted as an effort to pressure Wagoner to take a harder look at a possible alliance.   

Later that day, Wagoner said the success of the company's recovery plan was not dependent on the formation of a global alliance with Renault-Nissan.   

GM, which lost 10.6 billion dollars in 2005 and 2.7 billion dollars in the first half of 2006, has been touting the recent success of its restructuring plan.   

While its credit rating remains firmly in junk status, the automaker's success offering buyouts to its unionised workforce as it aims to cut 30,000 jobs has some analysts revising their outlooks upward.