Renault, Nissan and GM end alliance discussions

General Motors, Renault and Nissan said in a joint statement last week that they had agreed to terminate discussions on a proposed alliance among the three companies.

"The parties mutually recognised that significant aggregate synergies might result from the alliance. However, the parties did not agree either on the total amount of aggregate synergies or the distribution of those benefits," they said in a joint statement.

Based on its conclusions, GM had proposed that Renault-Nissan provide compensation as part of a potential alliance and for potentially precluding GM from entering other alliance opportunities if Renault-Nissan had made a significant investment in GM.

"Renault and Nissan consider that the principle of compensation is contrary to the spirit of any successful alliance," the companies said in the statement.

Speaking on the decision, GM chairman Rick Wagoner said: "The teams worked hard to agree on a process to evaluate synergies and to get the best data. And there was consensus on what specific initiatives could yield highest value, and those projects were jointly evaluated.

"In almost all cases, the teams were in agreement over the evaluation of the potential synergies and, very importantly, the relative distribution of those synergies among the three parties."

Mr Wagoner said the in one area there was disagreement - "on the valuation of the synergies" - there was no substantial disagreement on the relative distribution of the synergies. "As it turned out, we all agreed that the synergy levels were significantly in favour of Renault and Nissan."

On Monday evening and Tuesday, Mr Wagoner obtained support from the GM board to break of talks on the alliance after it reviewed the synergy study in detail, as well as other key aspects of the Renault-Nissan alliance model.

"In addition to the synergy projects, under the Renault-Nissan alliance model they would acquire a substantial block of GM common stock at market price, along with preferential rights that could preclude GM from entering into other automotive alliances," he said.

"Renault-Nissan made it clear they would not pay any market premium, nor compensate GM to balance the disproportionate impact of expected synergies, nor for potentially precluding other alliances."

The Financial Times last week reported that Renault-Nissan wanted to take a 20 per cent stake in GM and prevent GM from entering any other alliances, yet the savings Renault and Nissan stood to make were worth "billions of dollars" more than they would benefit the US company.

The GM board, Mr Wagoner said, determined that the alliance structure proposed by Renault-Nissan was not in the best interests of our stockholders. "In addition, our Board did not feel that using GM's available funding to invest in Renault or Nissan shares was appropriate at this time.

"And, finally, the proposed broad-based alliance model would represent a significant change in the way we are running our business. We did advise Renault-Nissan that we were very open to the idea of further exploring, and eventually implementing, individual synergy projects that are mutually beneficial. At this point, our understanding is that we will not be proceeding on this basis."