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Wednesday, July 26, 2006

Nissan Earnings Kill GM Partnership (GM)

No one really believes that the management of GM wants to set up a three way partnership with Renault and Nissan. The board of the auto giant has little choice as fiduciaries. They have to look at any reasonable public request to improve the company's fortunes, especially when it is championed by 9.9% shareholder Kirk Kerkorian. But, Nissan and Renault chief Carlos Ghosn would like to run the three-way tie up, no matter what he has said. Having one CEO over the entire operation also has the benefit of making sense. But, GM management would probably be shown the door, and its slow but steady turnaround plan would be savaged in favor of a more radical plan to cut the car makers costs.

GM staying independent may have its benefits. A cash infusion from Renault and Nissan would certainly make it more difficult to convince the UAW that GM is struggling and needs more concessions from the big union.

But, Ghosn has shot himself in the foot. Nissan's stock has already fallen over 30% since May. But, a good quarter could have turned that around. Unfortunately for Ghosn, operating income at the Japanese auto maker fell 26%. Not exactly a ringing endorsement of the turnaround abilities of the globetrotting executive.

GM's management can now take a perfunctory look at the Kerkorian plan for a three-way global partnership, and, then, quietly throw it into the garbage.

Douglas A. McIntyre can be reached at He does not own securities in any of the companies that he writes about.

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