GM talks tough with Renault Nissan chief executives in alliance talks

nissan-renault.jpgGeneral Motors toughened its public stance on proposals that the U.S. carmaker join an alliance with Renault and its sister company, Nissan, adding to uncertainties weighing on the industry as the Paris Motor Show opens its doors Thursday.  For the first time, Detroit-based GM said clearly that it was unhappy with the plan on the table, as chief executive Rick Wagoner met for talks with Renault and Nissan CEO Carlos Ghosn on the eve of the show.

GM sees a smaller payoff for its own shareholders than for those of Renault and Nissan, spokesman Brian Akre said, and is seeking compensation for that imbalance as part of any deal.

“The benefits identified so far are disproportionate among the companies,” Akre said. “GM would be looking at ways to alleviate that concern. Speaking hypothetically, that could include a payment, that could include a number of different options.”

He declined to comment on a report in The Wall Street Journal that GM is asking for a multibillion-dollar sum from Renault and Nissan.

Urged on by billionaire investor Kirk Kerkorian, who owns 10 per cent of the company, GM agreed in July to enter confidential exploratory talks with Renault and Nissan _ but has been coming under increasingly public pressure to sign up to a three-way alliance.

In a briefing with newspaper and magazine journalists earlier this week, senior Renault negotiator Patrick Pelata said GM needs the savings an alliance would bring to fight off ever-tougher competition from Japan’s Toyota Motor Corp. The alternative, Pelata was reported as saying, was to “wait for a miracle, or an earthquake in Japan.”

GM has recently announced plans to close 12 plants by 2008, slash its work force and cut costs, amid intense competition from Asian rivals.

Ghosn’s team has identified US$10 billion in annual savings for GM if the alliance goes ahead, according to a report in The Detroit News that cited a person close to Renault among its anonymous sources.

General Motors Corp. shares gained 96 cents, or 3.1 per cent in late afternoon trading Wednesday to $32.37, as analysts said they saw the company’s reported cash demand reducing the likelihood of a deal with Renault and Nissan. Renault shares closed 0.6 per cent higher at 89.80 euros ($113.90).

“Although we expect the companies to continue discussions, we view a major agreement to be unlikely,” Standard and Poor’s analyst Efraim Levy said in a note to investors.

The proposed alliance could be “counterproductive if it allows a capacity-restrained competitor access to GM plants, thus accelerating GM market share losses,” Levy added.

Renault and Nissan would win more savings from systems integration than GM, which already has a global system for IT and product development, U.S. critics of the alliance project say. Unlike GM, Renault and Nissan also have no heavy-duty truck platforms in the United States or hybrid vehicles powered by a combination of gasoline and either electricity or green fuels.

In a joint statement issued after Wednesday’s three-hour meeting between Wagoner and Ghosn, all three carmakers said their negotiators will “continue to explore the potential opportunities of an industrial alliance,” without giving any details of the talks. Both sides have set a deadline of Oct. 15 for a decision on whether to press ahead with an alliance.

Industry-watchers have suggested that Renault and Nissan could turn to Ford Motor Co. if the discussions with GM break down _ a possibility Ghosn has never ruled out. “I have said from the beginning that the expansion of the Renault-Nissan alliance to a North American partner makes sense,” he told an industry conference later Wednesday.

The drama of the alliance talks threatened to overshadow the Paris Motor Show, which this year finds the U.S. and European car industry cutting jobs and costs as they struggle to keep up with Asian automakers like Toyota, which is on course to sell more than one million cars in Europe for the first time this year.

French carmaker PSA Peugeot Citroen SA announced plans Tuesday to cut seven per cent of its European work force and cancel construction of a planned assembly plant in Slovakia in an attempt to shave 125 million euros ($158 million) off annual costs.

The Paris event will showcase more than 60 new automobile models and glitzy concept cars from about 500 manufacturers, and is expected to draw over a million visitors. After two days of press events, it opens to the public from Sept. 30 until Oct. 15. [AutoNews24h]