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Caution on GM-Renault-Nissan Deal

A French official expresses wariness of a proposal for an alliance among the automakers.

July 05, 2006|From the Associated Press and Bloomberg News

France should be cautious about the prospect of General Motors Corp.'s joining the Renault-Nissan alliance, an official said Tuesday, a day after the Renault and Nissan boards invited GM to begin talks.

"We should be extremely cautious," Industry Minister Francois Loos said in an interview with i-Tele television. "This shouldn't be taken as a done deal; it's an idea."

Loos was speaking after the board of Renault and Nissan Motor Co. on Monday authorized Carlos Ghosn, who is chief executive of both carmakers, to begin negotiations with GM if its board agrees.

The French state holds about 15% of Renault.

A partnership of Renault-Nissan and GM would nevertheless be "positive" in principle, the minister said.

GM's shares jumped almost 9% on Friday after Kirk Kerkorian, its largest shareholder, with a 10% stake, said Renault and Nissan were interested in a three-way alliance -- without giving details of what that would entail.

Under their existing partnership, Renault owns 44.4% of Nissan, which in turn owns a 15% stake in Renault.

Detroit-based GM has been engaged in an extensive turnaround plan in North America amid declining profit, high labor costs and growing competition from Asian automakers. The company announced plans last year to close 12 plants by 2008 and said 35,000 hourly workers had agreed to retire early or accept a buyout package.

Stephen B. Cheetham, a London-based auto analyst with Sanford C. Bernstein Ltd., said the benefits to Renault from a deal with GM were not clear.

Both companies already have strong presences in Europe, Cheetham said, and "if Renault were ever to contemplate a return to the U.S., Nissan already offers sufficient infrastructure to act as a platform."

GM's board plans to resume discussions Friday on Kerkorian's proposal for the alliance, people familiar with the plans said.

GM directors will use a previously scheduled conference call to review the proposal from Kerkorian, several people with knowledge of the call said. They asked not to be identified because GM doesn't confirm board meetings in advance.

The board first discussed Kerkorian's proposal Friday, when Kerkorian's Tracinda Corp. disclosed it in a letter to GM CEO Rick Wagoner.

Kerkorian, 89, who launched an unsuccessful bid to take over the former Chrysler Corp. 11 years ago, wants a GM alliance with the French and Japanese automakers or a faster alternative to Wagoner's current four-point plan for cost cuts and revenue-boosting new models to return to profitability, one source said.

The GM board, which meets the first week of most months, typically doesn't have a face-to-face meeting in July because most of the automaker's operations are closed for a summer break, the sources said.

After Wagoner announced a restructuring plan in June 2005, the board started having conference calls in months without a face-to-face meeting to cover issues that couldn't wait, the sources said. The Friday meeting was originally scheduled for that purpose, they said.

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