GM CEO: Alliance Could Have Hindered Turnaround

Rick Wagoner Cites Lack of Premiums, Flexibility for Dropping Renault-Nissan Deal

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DETROIT (AdAge.com) -- General Motors Corp. Chairman-CEO Rick Wagoner said today the alliance discussed -- and now dropped -- with Renault and Nissan Motor Corp. would have been a potential "distraction to our current turnaround efforts."
GM Chairman-CEO Rick Wagoner explained why the board rejected an alliance with Renault and Nissan Motor Corp.
GM Chairman-CEO Rick Wagoner explained why the board rejected an alliance with Renault and Nissan Motor Corp. Credit: AP

Legacy costs
Any deal, Mr. Wagoner said during a news conference, wouldn't have helped GM with its U.S. legacy costs and could obstruct GM's move to a global management system. "We felt that the complexities of working with three companies could, in fact, slow us down."

Mr. Wagoner said the board rejected the alliance on several counts: there was no premium to GM to balance Renault-Nissan's "disproportionate share of the synergies"; no premium from Renault-Nissan to buy a minority stake in GM; and the proposed structure would have blocked GM from pursuing other alliances without adequate compensation.

GM remains open to working with other carmakers on projects "that add value to our business and our stockholders," said Mr. Wagoner.

Project by project
Speaking at GM's world headquarters here, he said GM is in favor of working with Renault-Nissan on a project-by-project basis, such as its joint venture for a light commercial vehicle in Europe.

GM's board voted unanimously Oct. 3 to end talks with Renault and Nissan. Mr. Wagoner said the entire board was on hand for the vote and every member voted. That would include Jerome York, the representative major shareholder Kirk Kerkorian pushed GM to add as a director.

More Kerkorian buys?
Mr. Kerkorian, a Las Vegas billionaire and one of GM's largest shareholders, pushed the courtship this summer. Last week, he indicated his investment firm, Tracinda Corp., may consider buying 6 million more shares of GM stock that would raise his stake from 9.9% to 12%.

John Murphy, auto analyst at Merrill Lynch, in a report issued this afternoon said, "We believe Kerkorian is invested in GM for a turnaround and will keep pressure on the company to unlock/create shareholder value in any way possible."

Renault-Nissan in a release today said the alliance talks with GM had ended, and that GM's proposal that Renault-Nissan provide compensation as part of the alliance and its desire to be allowed to enter other alliances "is contrary to the spirit of any successful alliance."
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