Why The GM Deal With Nissan/Renault Is Dead On Arrival
GM's largest shareholder, Kirk Kerkorian has been in touch with the heads of Nissan and Renault about buying a minority stake in the U.S. auto company and creating a three-way international alliance to build and market cars. GM's stock opened the day up sharply, but began to fall off almost immediately.
It won't happen.
Although Nissan's stock is off its April/May highs, it is still well above its two year bottom of early 2005. Sales of Nissan's vehicles in Japan have caused the company's shares to move down. However, the company still says it will sell 4.2 million vehicles in fiscal 2008. Carlos Ghosn's turnaround if Nissan is legendary in the car business, notwithstanding its current issue.
Ghosn is also now chairman of Renault and the European car company has cross ownership with Nissan with each owning shares in the other. The company's stock is doing unusually well, and Ghosn's presence at the company has helped it be viewed as a substantial force in the European auto industry. The company is now the 10th largest auto maker in the world with 2005 sales of 2.553 million cars.
GM, with its massive labor problems and junk-grade debt is hardly an attractive partner for tow smaller but more stable can companies. GM's situation may have improved, but a 2007 strike by the UAW is still a possibility if the union makes a last stand to protect jobs.
Additionally, and perhaps more important, GM's financial condition and falling market share are the most important hammers the company has in dealing with the UAW. An alliance that improves GM's short-term financial situation exacerbates the ability of the company to rebuild its North American operations by giving the union a bargaining chip.
Although they may be tempted, a partnership with GM is not in the cards for Nissan or Renault. Carlos Ghosn is too smart for that.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies he writes about.
It won't happen.
Although Nissan's stock is off its April/May highs, it is still well above its two year bottom of early 2005. Sales of Nissan's vehicles in Japan have caused the company's shares to move down. However, the company still says it will sell 4.2 million vehicles in fiscal 2008. Carlos Ghosn's turnaround if Nissan is legendary in the car business, notwithstanding its current issue.
Ghosn is also now chairman of Renault and the European car company has cross ownership with Nissan with each owning shares in the other. The company's stock is doing unusually well, and Ghosn's presence at the company has helped it be viewed as a substantial force in the European auto industry. The company is now the 10th largest auto maker in the world with 2005 sales of 2.553 million cars.
GM, with its massive labor problems and junk-grade debt is hardly an attractive partner for tow smaller but more stable can companies. GM's situation may have improved, but a 2007 strike by the UAW is still a possibility if the union makes a last stand to protect jobs.
Additionally, and perhaps more important, GM's financial condition and falling market share are the most important hammers the company has in dealing with the UAW. An alliance that improves GM's short-term financial situation exacerbates the ability of the company to rebuild its North American operations by giving the union a bargaining chip.
Although they may be tempted, a partnership with GM is not in the cards for Nissan or Renault. Carlos Ghosn is too smart for that.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies he writes about.
posted by douglas mcintyre at 10:22 AM
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