| DETROIT--The chief executives of General Motors Corp. and Nissan-Renault terminated talks about a possible globe-spanning alliance, according to a person familiar with the situation.
In a phone call this morning, GM's CEO Rick Wagoner and Carlos Ghosn, chief executive of Nissan Motor Co. and Renault SA, decided that the two sides were too far apart on the value of the potential tie-up and decided to stop the high-stakes talks which had been underway for two months. A GM spokesman declined to comment. The move comes ahead of the mid-October deadline the two sides had set for a decision. Behind the failed talks was GM's demand that Nissan-Renault pay GM a "control premium" if it bought 20% of GM's stock as part of the alliance, according to another person familiar with the matter. Mr. Wagoner told his board Tuesday that investment bankers advised GM to secure a 20% control premium because such an alliance –while not technically control—would prevent the Detroit auto maker from making any other joint ventures. Messrs. Wagoner and Ghosn agreed that both sides would reap "synergies" by combining forces in an unusual alliance, but finally concluded this morning that they couldn't agree on the "payment" that GM sought its participation in a joint venture. In recent days, GM executives have said they wanted some kind of "equalizing contribution," possibly a payment of billions of dollars, to make up the difference in what it sees are greater savings for Nissan-Renault. The latest demand for a control premium made it clear to Nissan-Renault that there were fundamental differences in how the companies viewed an alliance. The abrupt breakdown in the alliance talks means that GM, whose leadership hadn't shown enthusiasm for working with Mr. Ghosn, will continue on its own turnaround plan at this critical juncture when the big three Detroit auto makers are struggling. GM, like its U.S. peers, is in the throes of restructuring its auto operations after massive losses and shrinking market share in North America. The move is a blow to GM's biggest individual shareholder, Kirk Kerkorian, who had pushed for the alliance to get Mr. Ghosn's turnaround expertise, and to prop his large stake in GM. Last week, Mr. Kerkorian had sought to prod GM to obtain an independent review of possible savings from the alliance. At yesterday's GM board meeting, directors didn't vote on whether to obtain an independent review. He also indicated he might purchase additional shares to bolster his hand. GM, which had losses of $10.6 billion last year, recently has had an upturn in earnings. The rebound has bolstered the stance of GM CEO Mr. Wagoner in his battle with GM's largest individual investor, Mr. Kerkorian. Mr. Kerkorian and his representative on GM's board, Jerome York, have pressured Mr. Wagoner to take more aggressive steps to restructure the auto maker and pushed the CEO into considering the alliance with Renault SA and its partner, Nissan. Mr. Wagoner met Mr. Ghosn, the CEO of both Renault and Nissan, last week at the Paris Auto Show. People familiar with the matter have said top GM executives don't believe the company needs an alliance with Renault and that GM's turnaround is gaining momentum.
Since July, executives from GM, Renault and Nissan have been analyzing possible synergies and cost savings that could result if they joined forces from purchasing parts to sharing vehicle platforms. But just as these talks began, GM's Mr. Wagoner also spoke with Ford Motor Corp. chairman Bill Ford, a sign that he was exploring other options to working with Mr. Ghosn. Those talks ended after Ford last month hired a new chief executive. Mr. Ghosn continues to be interested in forming an alliance with a North American auto maker, the person familiar with the matter says, and is expected to watch for opportunities ahead, particularly if the Detroit-based companies continue to falter and show a willingness to work with Nissan-Renault.
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