GM Board OKs Talks with Nissan/Renault
07 July 2006
The General Motors Board of Directors today endorsed a recommendation by the company’s senior management that it engage in exploratory discussions with Renault and Nissan regarding GM’s potential participation in an alliance among the three companies.
On 30 June, GM’s largest shareholder, Kirk Kerkorian’s Tracinda Corp, revealed that Nissan and Renault, both run by Carlos Ghosn, were “receptive” to taking a combined 20% stake in GM (10% apiece). Tracinda sent a letter to GM CEO Rick Wagoner proposing that GM’s directors form a committee “to immediately and fully explore this opportunity together with management.”
The letter said that a three-way alliance could provide GM “substantial synergies and cost savings and thereby greatly benefit the company and enhance shareholder value.”
The GM Board action was taken in response to that request made by Tracinda Corporation and to the expressions of interest made public by the respective boards of Renault and Nissan, despite much public speculation over the intervening week that GM would reject any such discussion.
The GM Board of Directors authorized management to proceed with its plan to consider ideas the other two companies have and to weigh the potential benefits of such an alliance in order to assist the Board in its decision making.
Management will keep the Board well informed and the directors, of course, will closely monitor the process to assure that its outcome serves the best interests of all GM shareholders. The Board continues to fully support the company’s North American turnaround strategy, and we encourage management to also continue its efforts to conclude a satisfactory resolution of the issues associated with the Delphi bankruptcy and to complete the pending GMAC transaction.
—GM Director George Fisher
GM Chairman Rick Wagoner will lead the company’s effort to conduct exploratory talks with the managements of Renault and Nissan.
We will enter into discussions with the managements of Renault and Nissan with an open mind—eager to hear their ideas of how an alliance between our companies might work to our mutual benefit. Given the complexity of any potential relationship, it has to be carefully considered on its merits before coming to any conclusion. We are committed to an objective and thorough review of that potential.
—Rick Wagoner
Wagoner noted that when the idea of joining an alliance with Renault and Nissan was first suggested to him, he promptly contacted Carlos Ghosn and the two leaders agreed to meet at a mutually convenient time to have an initial exploratory discussion.
In the meantime, both Wagoner and Fisher noted that it is crucial for General Motors to stay focused on implementing its North American turnaround strategy.
Rapidly following GM’s decision, Renault and Nissan simply stated that “We look forward to starting the discussion process soon.”
Let the GM bashing begin! (although by now I think we've herd it all)
Posted by: Neil | 07 July 2006 at 11:24 AM
7/7/06
USA Motorist
Dear Nissan:
Here's some free advice:
1. Stand up
2. Push the chair in
3. Step away from the table
Posted by: bert | 07 July 2006 at 11:30 AM
This is one of those news items that I honestly don't know what to think about. I keep reading all these conflicting comments about whether it would be good or bad for various parties involved, and I just can't come to any firm conclusions on my own.
If N/R invests a boatload of money in GM and can then get them to listen, then I could see it as being a reasonable or even good deal for the companies, and more important, the consumers. But if GM will simply crank up the power on their Reality Avoidance Field, then it will be a lot of money and talk sloshing around to little benefit.
Perhaps I'm being cynical. In my old field of work, computers, we used to see these kinds of alliances come and go all the time, with few of them lasting or having any appreciable effect on the business or the products available to consumers.
Posted by: Lou Grinzo | 07 July 2006 at 12:13 PM
Let the GM bashing begin!!!
Here I go. Since the French government subsidizes Renault and Nissan, maybe they can start subsidizing GM?? All those UAW guys would love to get on the French welfare system. Maybe if GM were still building good cars like the EV1 they wouldn't be in this situation. French Hummers. Sounds dirty.
Posted by: Joe Rocker | 07 July 2006 at 12:48 PM
Kerkorian is certainly stirring the pot, isn't he? It's unclear if his apparent objective of accelerating GM's recovery would be helped by plunging the company into a complex co-opetition arrangement with Renault/Nissan just ahead of complex - and no doubt difficult - renegotiation of the UAW labor contract in 2007.
It's also unclear how Renault/Nissan would benefit, as opposed to Carlos Ghosn's ego and bank balance.
One option would be for the three carmakers to collaborate on clean diesel engines capable of meeting EPA Tier 2 Bin 5 / CARB LEV II emissions standards. This could mean suitable aftertreatment (NOx store catalyst or SCR) and/or HCCI combustion. VW and Honda have both announced their intent to release vehicles with such engines before the end of the decade. European emissions regs are tightening and emerging markets such as China and India would welcome a clean diesel option. Even the Japanese might reconsider. The US could certainly use fuel-efficient diesels for its vast fleet of trucks and SUVs, provided they are clean enough.
In return, Renault/Nissan could license hybrid electric technology from GM. However, Carlos Ghosn is a known sceptic because the cost of batteries remains so high.
A second option would be for GM to kill off a couple of its weaker remaining brands (e.g. Buick and Pontiac) by simply selling them off. To avoid legal wranglings, the affected franchisees would have to be persuaded to go along voluntarily. Any dealerships transferred would have to continue to offer spare parts & service for legacy vehicles of the affected GM brands for a suitable number of years.
It would be up to Renault/Nissan to decide how quickly to cut these dealerships over to its own brands and products. In particular, Renault would have to decide if it wanted to re-enter the US market with its own models by leveraging Nissan's expertise there. It owns 44% of the Japanese carmaker. Nissan in turn holds 15% of Renault.
Giving up dealerships would reduce GM's market share. However, it would permit a "rightsizing" if you will, thinning out the dealship network to match sustainable market share for the corporation as a whole. It would also make it easier to differentiate the remaining brands from one another.
The big question is if GM could meet its colossal obligiations to retirees with a reduced set of re-invigorated brands (e.g. Saturn), in the face of increased competition. The UAW would need to be convinced that moderate demands on behalf of its members would help lead to a return to profitability and the job security it entails. I see no chance that GM can increase its share of the US market in the short term unless oil prices suddenly drop below $50 a barrel. GM's model line-up is simply inappropriate for current market conditions.
Posted by: Rafael Seidl | 07 July 2006 at 01:04 PM
Hard to imagine what Renault could possibly offer GM... other than French welfare. GM already sells more cars in Europe than Renault. The Surrender Monkeys would probably be all for it just to say that they own a big piece of the USA.
Nissan? Their products are certainly better but they reliability has suffered tremendously since get frenched. And their new designs are horrid, see Murano and Quest.
What is GM going to offer in return? 5.3 V8's? All that excellent hybrid technology they developed for the Silverado? Active fuel management is the only thing I can think of that would be of any value to the Nissaners or Surrender Monkeys.
Posted by: mrnimmo | 07 July 2006 at 01:29 PM
A good business deal for Renault-Nissan would be to wait another 12-24 months, buy control of GM very cheaply, close most of it down, except for the 3-Ton well-liked profitable dinosaur lines, equip same with high performance imported diesels.
The few 'good' GM brand names could be replaced/complemented with reliable Nissan units.
Send most over-paid UAW members on long term unpaid leave.
Posted by: Harvey D. | 07 July 2006 at 02:00 PM
Neither company is committed to hybrids :(
Posted by: ChavezIsADictator | 07 July 2006 at 05:45 PM
GM should be running for the exit, the idea of teaming with Renault and Nissan would completely destroy their chances of saving the corporation. I mean, think about it, looking to RENAULT for leadership or vision? Nissan? GM would be better served by a partnership with Hyundai or trying to get more out of their relationship with Shanghai Auto. The thing to remember is that Buick is a hugely popular car in China, and its sales are probably going to continue to thrive, unless GM makes more foolish mistakes. They seem to be ready to produce a plug in hybrid within a year or two, which will be interesting if true.
Posted by: Ziv | 07 July 2006 at 06:39 PM
What is the point of right-wing bigots coming to Green Car Congress to comment anyway? You don't really give a damn about the environment because Greed God and his Invisible Hand would never let his American Patriarchs come to harm. You hate the unions, so you must love the corporations, which view the environment as something to destroy for quick profit. Have a single one of you ever considered that forty years ago a high school grad could rise to a job paying 13 bucks an hour thanks to the UAW? Adjusted for inflation, that's about $100 an hour now. Yet you celebrate it as progress that those jobs are destroyed so that deserving entrepreneurs like Ken Lay (may he rot in Hell) and the idiot du jour at GM can get billions. I thought the point of capitalism was that every generation of American could be assured its children would have better pay - without having to work longer hours or give much of it up to a 401K fund set up to be stolen by a planned bankruptcy. Forty years of wage stagnation and union-busting, and now big business is using its grotesque new profits to buy a pro-pollution government committed to poisoning us. What's Green about that? Oh, you thought it meant money.
Finally, I am going to say this as someone who knows so much more about American history and the sacrifice of soldiers in war than you all do that you really deserve to have your liberties stolen by a redneck dictator: France lost one-third of all its men of fighting age in winning the First World War. Try to turn off Fox News and think about what your life would be like in the years after such a cataclysm. In those days, fighting age meant past age 40. One out of every three men born between say, 1966 and 1988, dead on one strip of land running a couple of hundred miles. I could go on about how you would feel about war, about surrender, and about sacrifice in such a situation. Instead, I only need say that the Confederate States of America surrendered in a similar situation, and that America has only picked on countries it believed weak since 1945 because our leaders, whether you accept it or not, knew we are not capable of that kind of sacrifice and never will be again. Unfortunately, we were wrong about how weak some of these places were, and each time we failed to conquer a Vietnam or Iraq more of the world has come to understand that we are nothing without our money and the Orwellian technology we buy with it.
So don't bash the French until you're willing to sacrifice, say, 20 million of your countrymen against an invader (remember, you might have to be one of them). In fact, if your invasion of a foreign country isn't worth losing 20 million of your countrymen, that must mean the purpose of the invasion was not really self-defense. Self-defense would mean stopping the threat of global pollution, which is the actual point of this website.
Posted by: super390 | 08 July 2006 at 12:07 AM
super390.
Yeh. The French bashing makes the GM bashing look mild.
Also, I think we need to pause and think about the demise of the UAW or any other union, for that matter. This may just be the final harbinger for the death of America's middle class. An America that primarily just consists of the rich and poor is no cause for celebration.
Posted by: t | 08 July 2006 at 07:47 AM
mrnimmo;
Will French/Japanese bashing help GM to produce better vehicles and regain local market share? While you are at it, how about Oil producing countries bashing for buying big chunks of USA (with USA petro-dollars), with the help of gas guzzler producers such as GM and Ford and Germany bashing for buying Chrysler?
That being said, Renault and Nissan may not be the best partners for GM but they seem to share the same resistance to Hybrids.
An alliance with (or a sale to) Chinese and Korean producers would make it easier to transfer GM production to those countries where labour is much cheaper. It already happened in many other fields (electronics, clothing etc. Car industry may be next.
Posted by: Harvey D. | 08 July 2006 at 08:14 AM
I think we are off topic here...
First, there is nothing productive in bashing either GM or Renault.
Second, in order to be productive, we need to look at the potential positives that could come from this arrangement between the three companies.
IMO, it is essential for these three companies to develop a HCCI engine. If they do not, Honda/VW will destroy them. After all it will be a superior product (superior fuel economy, performance, and probably reliability). Consumers will always flock to a superior product.
Third, we should be looking at this not only from an environmental standpoint, but also from a economical standpoint.
Clearly there is too much supply in the auto world. After all, how often do you NEED to buy a new car? They are pretty well made now, so not that often. If GM and Nissan could consolidate their dealership network, factories, and possibly platforms in the U.S. it would be a huge win for both companies. You could keep the successful vehicle architectures from each brand and kill off the rest. Brilliant!
As for Renault.... eh. I can't say I know much about the company. GM could probably benefit from their light diesel engines, while Renault could benefit from GM's hybrid tech. They could also consolidate their dealership networks in Europe. That seems like a win/win. No?
So, in the end, this could be a huge win for everyone. The consumer could benefit from a better product lineup, the companies could benefit by tech sharing and consolidating, and the environment could benefit by having more "clean power" introduced and developed.
Now who's not onboard for all of that?
Posted by: John | 08 July 2006 at 05:25 PM
What hybrid technology of GM? I mean real hybrid technology because the very-mild stuff they actually produce is not a thing someone would want to get (it can be developed easily enough).
Their so-called two-mode hybrid technology is only talk yet, nobody has ever seen it.
Posted by: Andras | 09 July 2006 at 02:15 AM
John -
according to the CEO of AVL, HCCI will probably see the light of day in diesel engines first, by way of late-injection strategies initially pioneered by Nissan (MK System). Still, you need to support up to 50% cooled EGR, add a pressure sensor to each cylinder (integrated into glow plug) and variable swirl intake ports.
For gasoline HCCI, you need a highly variable valve train for up to 70% hot EGR plus a pressure sensor in each cylinder (integrated with the spark plug, based on ion current) plus exact, fast measurements of air mass and EGR rate plus fairly massive CPU horsepower in the controller. If you add GDI, you can extend the portion of the engine map that can be covered in HCCI mode.
Gasoline HCCI (and even more so, NG HCCI) is even trickier than diesel HCCI because the fuel has poor low-temperature reaction kinetics, leading to a fairly long ignition delay. Control systems theory will tell you that any system with significant delay in the loop is more difficult to keep within tight tolerances. In an engine, shifting the center of heat release by one degree crankshaft can affect power output by 4-6%.
The hardest part is controlling gas composition and temperature at the moment of inlet valve close, because that determines the auto-ignition timing. The transition to and from HCCI mode has been solved and a complete NEDC cycle traversed in the lab (AVL CSI engine). Fuel economy goes up by ~10% relative to the same engine in spark ignition mode, which is already low compared to a regular PFI design with fixed valve timing.
Another issue is pairing HCCI with turbochargers, which gets starved because of the extremely high EGR rates. This is particularly noticeable during transitions to and from HCCI mode. One option, especially for diesels, is to perform the EGR *after* the gas has passed the turbine. The snag is that you then have to have a very effective EGR intercooler or the temperature at compressor intake will be too high.
Andreas -
"micro" and "mild" hybrids are legitimate concepts in their own right. The benefits are not as pronounced but the costs are much lower. In terms of environmental benefit - as opposed to individual bragging rights - what counts is the number of vehicles with better fuel economy, more so than the improvement of a select few. It will take time for carmakers to learn how to match their hybrid layouts with customer expectations. It is not unexpected that some of the initial vehicle concepts (e.g. Honda Insight, Accord Hybrid) have not achieved stellar sales.
The notion that "full" hybrids are the only ones worth the trouble is simply incorrect. For example, Citroen paired a micro-hybrid system with its diesel C2 subcompact to eliminate idling at traffic lights. In city driving, that alone improves fuel economy by ~5%.
Btw, the GM/BMW/DCX two-mode transmission is a full hybrid and it is not vaporware. It's just that it takes several years to bring a concept to market in a vehicle consumers can buy. I'm sure the three-way tie-up, while reducing R&D risk and cost, also increased tiem to market a little. GM's Allison division oroginally developed the technology for buses. The LDV variant is essentially a scaled-down version and is expected to hit showrooms in the MY 2008 season. Again, patience.
Posted by: Rafael Seidl | 09 July 2006 at 04:26 AM
I think that anyone who know anything about cars, or the auto industry in general, knows that Carlos Ghosn is one of the best automotive managers around. He probably would rank pretty high, all time. His decisions over the years have helped Nissan, and Renault become more profitable. So any collaboration with GM should be welcome.
There is really no sense to all the GM/French bashing in this thread. Lets move forward. Business in this day is global, and not national as most expect. GM has collaborative efforts with "Ford" and also with "Diamler/Chrysler", and I am sure others going on as we speak. So if there is a mutual benefit from any talks, I applaud that effort. Carlos Ghosn's opinions should be strongly considered, in my opinion.
GM is a huge entity, and this collaboration, discussion, meeting, or whatever you call it, will not bear any fruit for a while. It takes a while to turn something as big a GM. But I do think I see GM's wheels turning. Any discussions with Renault/Nisasan can help that turnaround. GM's problems with labor, and with the retirement/healthcare of it employees is a major obstacle that has to be addressed. Nobody wants to see a GM collapse, as it would be very bad for a lot of people, with a ripple effect on the world economy.
Posted by: Mark A | 10 July 2006 at 06:32 AM
So tell me again, after your tirade about how the French lost 20 million in WWI and then surrended in 20 days in WWII--and that is stretching it a little--, what Renault brings to the table? How could Renault help GM? I can be green without being pink or worshipping the solar bicycle/rickshaw myth.
Posted by: mrnimmo | 10 July 2006 at 08:07 AM
super390,
#1. The French lost 1,357,800 people in WWI (not 20 million). I don't know what that has to do with the fact that in the year 2006 they are a welfare state with 10% unemployment (2-3 times the US rate). Renault would not exist if it were not for the fact that the French government subsidizes it. To get back to the subject, how exactly does combining with such a company going to benefit GM? GM needs to compete with Toyota and Honda if it is going to exist in the coming years. Giving away what small amount of green technology it has it not going to help it.
#2 Am I a right wing bigot??? I will have to tell that to my wife who is of a different race than I.
Posted by: Joe Rocker | 10 July 2006 at 12:53 PM
super390,
I don't think that bashing the French is a sign of right wing politics or bigotry. The French deserve bashing on the merits.
In the matter of international affairs and common defense, it's not so much what happened in the WW's as what has happened since. Their behavior is consistently egregious: Dropping out of NATO while enjoying its umbrella of safety. Blatant hyper-nationalist colonialist wars long after every other European country had granted independence, even to countries woefully unprepared for it. Aerial and underwater nuclear tests long after all other nuclear powers had agreed to stop them. Collusion with the scummiest dictators while pretending to be allied against them for nothing more noble than financial gain and sticking it to the US because they are jealous that they aren't the world power that they think God gave them the right to be. Using their undeserved, pity-post membership on the UN Security Council to vote with the Chinese and Russians and against the US and UK half the time. Anyone care to add to the list?
In matters of economics: They have the most protectionist policies on a protectionist continent. While pretending to care about the 3rd world, they consistantly prevent most imports from it in order to coddle their inefficient neo-Communist agricultural system. They prop up companies and entire industries with the hard-earned money of their citizens so that they can then overpay for uncompetitive products. Which they do because they are ultranationalist. Their economy is in such a state of decay from beauracracy that it is headed for where India once was. They totally fail to embrace their immigrants as REAL Frenchmen and give them no way up. Anyone care to contribute?
And the list could continue into other fields. The corruptness of the politics. The cultural snobbery. I've been there. We purchased a French company. Under the friendly exterior lies the most undeserved superiority complex on Earth.
As for your observation about the unions. Consider that when you argue that a union employee should be paid two or three times what his labor is worth on the open labor market (which he can because of the legalized extortion that is a strike), you are denying the very fundamental heart of capitalism - market economics. And who gains? The union worker. Who loses? Everybody else. The consumers pays more for the products and are thereby impoverished to exactly the extent to which the union workers are enriched. It is a transfer payment to the undeserving. Ultimately, the employer becomes uncompetitive and even the union worker is hurt. So I guess there is another winner - foriegn competition. Unions had a place when they fought for working hours, safety, etc. Since everything they were founded for now has the force of law, they merely exist to extract from society more than the share that they deserve on the merits.
Posted by: Kyle | 10 July 2006 at 02:49 PM
BTW, super - 401k's are employee owned and not involved in any way in a bankruptcy. Hell, they're off limits in a personal bankruptcy.
Your rant jumps from one mindless radical-Left maxim to another w/o segue, as if they were all related in some grand conspiracy. I would love to debate you on a political forum. If you are involved and interested, point the way. I've filleted your type so completely, so many times, that I don't even need to work at it.
Posted by: Kyle | 10 July 2006 at 05:47 PM
Bravo, Kyle.
To be fair, Renault does make couple of darn good vehicles.
Posted by: Andrey | 10 July 2006 at 08:58 PM
Kyle, what does your political romp have to do with Nissan/Renault's Carlos Ghosn working with GM in collaborative and/or management decisions?
Arent these the kind of posts that we are warned about, and are to be deleted from this site?
Posted by: Mark A | 11 July 2006 at 04:45 AM
MarkA,
Your first post on this thread was after super390's over-the-top political rant. Why did you not respond to him in this fashion?
As for Ghosn - he's a damn good man. If this came to fruition, it might very well be good for GM. I doubt it though. Perahps Kerkorian is just trying to pump up his atrocious stock pick.
Posted by: Kyle | 11 July 2006 at 07:59 AM
This scheme reminds me of when Renault bought out American Motors, who promptly started producing and selling French cars. What a great example of going from bad to worse. I've never heard anyone who has owned a French car say anything good about it, except what a great day it was when they offloaded it onto someone else.
Now Renault is back, after General Motors, and gawd, what garbage is Nissan turning out! Like the old Renaults, the new Nissans have LOTS of electrical problems. A buddy of mine just got his fairly low mileage Maxima back from the dealer with an electrical problem- $2000 for a damn computer chip! Lately, Nissan embargoed Sentras because of so many complaints about oil consumption-they may have to replace the engines before they ever leave the dealer lot!
GM needs to pare down the number of models they sell; they need to adopt a similar product strategy that got the Big Three through the Great Depression- one basic car model per division with a variety of body styles, that exudes good value, is RELIABLE (with only one model it had better be damn good), and economical to operate. In 1933 Plymouth for example sold ONE basic model that was available in 28 different body styles from a basic roadster all the way up to the big 7 passenger limousines, and they made money in the year marked by the collapse of 70% of all American banks.
If ANY car company continues to build cars that MUST be taken to the dealership for computer analysis and repair, as so many of them ever increasingly are, that company will soon be out of business, in light of what is about to happen economically in this country. GM and the other American companies could get back on top if they built big, reliable, and EASY to service cars equipped with V8's designed to get over 30 mpg on the highway circuit, at a price several thousand below what a Toyota Camry sells for. Conventional technology exists right now that makes this possible, but will they give up on the idea of all of these S.U.V.s and their horrendous crackerbox "wannabe an Asian lookalike" compacts? I seriously doubt it.
Posted by: Dave Zeller | 14 July 2006 at 10:01 AM
Any body knows about auto industry, will know that nissan and hondas are lev 3and 2s, some toyotas are not,that is why they faces problem in europe with the eruo 4,they use less parts hence less trouble, now toyota has to build levs, by mean of help of cvt transmission, to meet standards, lets see how they perform in 2008.So you see nissan is not behind it is infront just need to get their act together, and futher more, they where the first car company to build an diesel engine that behaves as a hcci engine, check out the new 2.0 litre 170hp diesel
Posted by: chano129 | 07 March 2007 at 08:59 AM