Struggling GM to Consider Alliance With Foreign Rivals

Proposal Would Put Nissan's Ghosn At Center of Another Revitalization Effort

Rick Wagoner, top, is GM's chairman and chief executive. Carlos Ghosn leads Nissan and Renault. (Katsumi Kasahara - AP)

General Motors Corp.'s board of directors is expected to approve a plan to assess a possible alliance with two global rivals, setting aside the reservations of Rick Wagoner, the company's chairman.

GM investor Kirk Kerkorian first broached a three-way partnership involving Japan's Nissan Motor Co. and Renault SA of France in Securities and Exchange Commission filings last Friday. Analysts say GM's board will be required to take up a demand by Kerkorian to examine the partnership because of his 9.9 percent stake in the company. Kerkorian wants GM's board to set up a special committee to study the proposal.

The board is to meet via a telephone conference call today to consider the request. Under outlines proposed so far, Nissan and Renault would each take 10 percent stakes in GM in an investment amounting to $3 billion. On Monday, the boards at both Nissan and Renault gave Nissan chief executive Carlos Ghosn authorization to pursue a deal.

The proposal is the latest step in Kerkorian's bid to influence GM's restructuring. Any announcement by GM's board to go forward in examining the proposal opens the door to a larger role for Ghosn, an ambitious auto executive who shuttles between Paris and Tokyo as the head of both Nissan and Renault. Some analysts think what Kerkorian really wants is for Ghosn to take over leadership of GM, supplanting Wagoner.

Analysts said GM's board will probably have to go along with Kerkorian's request for the special committee. "The board has a fiduciary responsibility to the shareholders and not to management -- not to the CEO, even though he may be an influential force there," said Roger Aguinaldo, publisher of the M&A Advisor.

Ghosn has achieved rock-star status for his resurrection of Nissan. He is viewed as a potential threat to Wagoner's leadership at GM. The Wall Street Journal reported yesterday that GM management will lay out objections to the three-way venture during today's board meeting. Inside GM, Wagoner has tapped a small group to examine the feasibility of the venture from all angles, according to a person familiar with the activities. The source spoke on condition of anonymity because he was not authorized to speak publicly on the matter.

A GM-Renault-Nissan alliance would create an industry powerhouse. Globally, the partnership would have 14.3 million yearly vehicle sales and revenue of $327 billion, according to automotive market forecaster CSM Worldwide.

The automotive industry is undergoing an unparalleled period of restructuring and global consolidation. Renault bought a controlling interest in Nissan in 1999. With Ghosn at the helm, Renault helped pull the Japanese automaker out of a deep financial and product slump.

Germany's Daimler-Benz AG merged with Detroit's Chrysler Corp. in 1998, creating DaimlerChrysler AG. In the 1990s, Ford Motor Co. purchased Jaguar, Land Rover and Volvo. GM added Fuji Heavy Industry, Suzuki, Isuzu, Saab and Daewoo.

For GM, international projects have not always turned out well. GM had to pay $2 billion to break an alliance with Fiat SpA of Italy. It also has had to unload stakes in Fuji, Suzuki and Isuzu to raise cash to help save the North American division.

Through consolidation, automakers envision reaping vast savings from economies of scale in costs for vehicle parts, raw materials and manufacturing. In the GM deal, Tracinda Corp., Kerkorian's investment company, has said the proposed GM-Nissan-Renault partnership could reap substantial synergies and cost savings.

But reaction to the proposal has turned increasingly sour in recent days. A French industrial minister has warned Renault to be "extremely cautious" about any tie-up with GM. France holds a 15 percent stake in Renault. Dieter Zetsche, chairman of DaimlerChrysler, said synergies from such ventures are overstated and typically take years to be realized.