• by Karl Greenberg , October 6, 2006

General Motors announced yesterday it will terminate talks about forming an alliance with Nissan and Renault. The companies, in a joint press release, said they disagreed on the potential synergies, and which companies would benefit.

At a press conference, GM CEO Rick Wagoner said the GM board voted to reject the deal because it offered GM no premium to cede Renault/Nissan a greater share of synergies from the deal, and no premium for purchase of a minority stake in GM--and would block GM from pursuing other alliances without compensating GM.

Among the board members is former Chrysler executive Jerry York, who is investor Kirk Kerkorian's voice at the company, and the one analysts say planted the seed for the initial talks. The Las Vegas-based Kerkorian, whose Tracinda Corp. owns 9.9 percent of GM stock, backed the alliance. He has stated a plan to boost his investment in the company from 9.9 percent to more than 12 percent.

Wagoner said the board felt GM should not spend money funding Renault or Nissan shares. York has not said whether he will now leave GM's board--and, if so, press harder for changes at the number one automaker, according to reports.

Wagoner said the deal would also be a distraction from its current efforts at turnaround after losing $10.6 billion last year. The deal would offer no benefits to GM it its efforts to deal with towering legacy costs associated with pensions and employee healthcare, he said, adding: "It could impede our fast-moving efforts to evolve to a global management system."

Reports suggest that Renault chief Carlos Ghosn will approach Ford next. Analysts say that move makes sense because Ford is stronger than Nissan in the U.S., Nissan is strong in Asia, and Renault is a powerful force in the European auto market.

"There is going to be a lot of consolidation, and those who embrace it and try it--who invite it--will have control over the partners," says Todd Turner, president of Car Concepts, Los Angeles. "Those who wait and hold out will be forced into it."