Kerkorian Suggests Partnership Among GM, Renault and Nissan

Billionaire investor Kirk Kerkorian urged General Motors Friday to consider a three-way partnership with Nissan Motor and Renault. Through his Tracinda Corp. investment vehicle, he owns around 10% of General Motors. While this is an idea out of left field, it shows that someone at GM is engaged in thinking farther out than next quarter.

The fundamental problem for GM is the $10.6 billion loss it posted for last year. It is likely to be overtaken as the world’s largest car maker this year, with Toyota growing by leaps and bounds. To save on its costs and try to move into profit, the automaker is in the process of cutting 30,000 jobs and closing 12 plants. Enter Mr. Kerkorian.

It appears that he had dinner a couple weeks ago with Nissan CEO Carlos Ghosn, who managed to slash costs at Nissan and brought the debt ridden firm into profitability in 2001 after taking it over in 1999. Mr. Ghosn expressed an interest in Nissan and Renault both purchasing 10% of GM. GM would wind up with a cash injection of around $3 billion according to some analysts.

However, the link up may prove to be unwise for all concerned. Nissan, for example, has had an 18% drop in its sales, and it has had to close 2 of its 4 plants in Japan that do final assembly. Since Renault already has a 44% stake in Nissan, the question becomes whether this union is three companies coming together to move forward, or is it three companies losing money together?

Mr. Kerkorian came into GM with ambitions to move the company out of the doldrums, and this idea has some people thinking and talking seriously about it. The jury is out, and whether the board at GM will move forward is a political as well as an economic issue. The acknowledgement that something must be done, though, is a hopeful one.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Home