Could this be the "jolt" that GM needs to make a bold, radical move to convince the public - and Wall Street - that things really are headed in the right direction? Kerkorian has been - relatively speaking, for him - patient in waiting for Rick Wagoner to prove that he can turn the ship around. I'm not expert in such things, but this sure feels like one potentially large step toward Carlos Ghosn being handed the keys to the car. That, of course, is not an original thought, but Kerkorian's going public with the idea of GM, Nissan and Renault joining forces in some meaningful fashion gives real legitimacy to this speculation. And, given Ghosn's reputation as the savant de jour within the auto industry, one can only sit and ponder the potentially positive outcomes of such a move. Very, very interesting...
Kerkorian Presses GM to Join
Alliance of Renault and Nissan
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
June 30, 2006 2:22 p.m.
Billionaire investor Kirk Kerkorian is pressing General Motors Co. to "fully explore" joining the alliance between Renault S.A. and Nissan Motor Co., and said those auto makers are interested in expanding their partnership and buying a minority stake in GM.
Shares of GM were up $2.46, or 9%, at $29.90 in afternoon trading on the New York Stock Exchange after earlier spiking to $30.56. Tracinda Corp., Mr. Kerkorian's investment vehicle, owns 9.9% of GM's common stock.
Renault and Nissan Motor confirmed they have been approached and are open to the idea.
Tracinda said it sent a letter to GM Chairman Richard Wagoner in which it proposed that GM's board of directors establish a committee to examine teaming up with Renault and Nissan, which are both run by Carlos Ghosn.
In the letter, disclosed in a regulatory filing, Tracinda said: "It is our understanding that Renault and Nissan are receptive to the concept of including General Motors in their partnership-alliance and purchasing from General Motors a significant minority interest in the company."
Tracinda said the existing French-Japanese partnership has created "tremendous engineering, manufacturing and marketing synergies, resulting in substantial benefits and cost savings to both Renault and Nissan.'' The letter added: "We believe that participating in a global partnership-alliance with Renault and Nissan could enable General Motors to realize substantial synergies and cost savings and thereby greatly benefit the company and enhance shareholder value."
The letter also indicates that Tracinda has reached out to Renault Chairman Louis Schweitzer and Mr. Ghosn, who is chief executive of both Nissan and Renault, to alert them to its contact with GM. In a separate letter advising the two of the GM correspondence, Tracinda noted that "as we recently discussed with Mr. Ghosn, Tracinda believes that General Motors, Renault and Nissan should explore a three-company, partnership-based alliance."
GM issued a three-sentence statement Friday, saying it hadn't received any "offer or proposal from Renault/Nissan with respect to its participating in the Renault/Nissan Alliance, as suggested in the 13-D Filing made today by the Tracinda Corporation. The Tracinda request will be taken under advisement by the GM board of directors. At this time, we have no further comment."
Simon Sproule, corporate vice president of global communications and investor relations for Nissan commenting on behalf of both Renault and Nissan, said both companies are "open" to Tracinda's idea of GM joining the French-Japanese alliance.
Mr. Sproule said GM's board and management team will have to fully support the three-way-alliance idea "in order to start a study of this opportunity." He noted that the Renault-Nissan alliance is an open partnership which has never been restricted to the two partners. "Under the right circumstances and with appropriate partners, the alliance could be expanded further," he said.
The spokesman said the next move is up to GM.
Earlier this week, GM said it expects to report slumping June and July sales amid tough competition and efforts to wean itself from price wars that have hurt industry profitability.
GM's forecast, given at the company's quarterly sales-and-marketing update for analysts and the media, underscored the challenge the company still faces in attracting customers in an era of high gasoline prices, even as the buyouts and early retirements of about 35,000 hourly workers announced Monday show some progress in its efforts to reduce costs. Demand in particular has waned for some of the larger models of pickup trucks and sport-utility vehicles, which carry hefty profit margins for Detroit's auto makers.
Earlier this year, Jerome York, the senior adviser for Mr. Kerkorian's investment in GM, took a seat on GM's board, less than a month after he prescribed a dividend cut and other tough medicine for the auto giant. Mr. York, at that time, criticized GM management for not setting clear targets in its turnaround effort, in contrast to the approach taken by Mr. Ghosn.
Mr. Ghosn, who took over Nissan in 1999 at a time when the company was near collapse, laid out in public a series of goals for returning Nissan to break-even performance, eliminating debt, and later, achieving specific profit margins. His effort is generally considered the most successful automotive turnaround of recent history, and his name has even gone through the rumor mill as a possible successor to Mr. Wagoner at the helm of GM, which reported a loss of $10.6 billion for 2005.
Alliance of Renault and Nissan
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
June 30, 2006 2:22 p.m.
Billionaire investor Kirk Kerkorian is pressing General Motors Co. to "fully explore" joining the alliance between Renault S.A. and Nissan Motor Co., and said those auto makers are interested in expanding their partnership and buying a minority stake in GM.
Shares of GM were up $2.46, or 9%, at $29.90 in afternoon trading on the New York Stock Exchange after earlier spiking to $30.56. Tracinda Corp., Mr. Kerkorian's investment vehicle, owns 9.9% of GM's common stock.
Renault and Nissan Motor confirmed they have been approached and are open to the idea.
Tracinda said it sent a letter to GM Chairman Richard Wagoner in which it proposed that GM's board of directors establish a committee to examine teaming up with Renault and Nissan, which are both run by Carlos Ghosn.
In the letter, disclosed in a regulatory filing, Tracinda said: "It is our understanding that Renault and Nissan are receptive to the concept of including General Motors in their partnership-alliance and purchasing from General Motors a significant minority interest in the company."
Tracinda said the existing French-Japanese partnership has created "tremendous engineering, manufacturing and marketing synergies, resulting in substantial benefits and cost savings to both Renault and Nissan.'' The letter added: "We believe that participating in a global partnership-alliance with Renault and Nissan could enable General Motors to realize substantial synergies and cost savings and thereby greatly benefit the company and enhance shareholder value."
The letter also indicates that Tracinda has reached out to Renault Chairman Louis Schweitzer and Mr. Ghosn, who is chief executive of both Nissan and Renault, to alert them to its contact with GM. In a separate letter advising the two of the GM correspondence, Tracinda noted that "as we recently discussed with Mr. Ghosn, Tracinda believes that General Motors, Renault and Nissan should explore a three-company, partnership-based alliance."
GM issued a three-sentence statement Friday, saying it hadn't received any "offer or proposal from Renault/Nissan with respect to its participating in the Renault/Nissan Alliance, as suggested in the 13-D Filing made today by the Tracinda Corporation. The Tracinda request will be taken under advisement by the GM board of directors. At this time, we have no further comment."
Simon Sproule, corporate vice president of global communications and investor relations for Nissan commenting on behalf of both Renault and Nissan, said both companies are "open" to Tracinda's idea of GM joining the French-Japanese alliance.
Mr. Sproule said GM's board and management team will have to fully support the three-way-alliance idea "in order to start a study of this opportunity." He noted that the Renault-Nissan alliance is an open partnership which has never been restricted to the two partners. "Under the right circumstances and with appropriate partners, the alliance could be expanded further," he said.
The spokesman said the next move is up to GM.
Earlier this week, GM said it expects to report slumping June and July sales amid tough competition and efforts to wean itself from price wars that have hurt industry profitability.
GM's forecast, given at the company's quarterly sales-and-marketing update for analysts and the media, underscored the challenge the company still faces in attracting customers in an era of high gasoline prices, even as the buyouts and early retirements of about 35,000 hourly workers announced Monday show some progress in its efforts to reduce costs. Demand in particular has waned for some of the larger models of pickup trucks and sport-utility vehicles, which carry hefty profit margins for Detroit's auto makers.
Earlier this year, Jerome York, the senior adviser for Mr. Kerkorian's investment in GM, took a seat on GM's board, less than a month after he prescribed a dividend cut and other tough medicine for the auto giant. Mr. York, at that time, criticized GM management for not setting clear targets in its turnaround effort, in contrast to the approach taken by Mr. Ghosn.
Mr. Ghosn, who took over Nissan in 1999 at a time when the company was near collapse, laid out in public a series of goals for returning Nissan to break-even performance, eliminating debt, and later, achieving specific profit margins. His effort is generally considered the most successful automotive turnaround of recent history, and his name has even gone through the rumor mill as a possible successor to Mr. Wagoner at the helm of GM, which reported a loss of $10.6 billion for 2005.
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