Friday Snippets – heaps of GMRN

When you get an email entitled “9-7x to be cancelled” it certainly raises the eyebrows!

I’ve had some trouble this morning getting access to the Inside Line article that it linked to, but I think this one from Autoweek basically tells the same story.

General Motors and Ford Motor Co. will drop several light trucks to make room for crossovers.

GM will kill the Chevrolet TrailBlazer and GMC Envoy mid-sized SUVs.

It’s the timeframe here that’s important. The source of the story says that the model line will cease in 2010 to make way for more economical crossover vehicles. Of course, the 9-7x, should it still be in production by then, would go by default.

Saab’s due to have developed a crossover prior to this, so it shouldn’t be any big hiccup.

Thanks to Kent for the the tip

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Mark Ritson on GM Branding:

Pointing out that General Motors has a brand management problem is akin to telling your 92-year-old grandmother that she should improve her diet: it’s too late, and there are far bigger challenges ahead.

Swade on Mark Ritson on GM Branding:

Writing an article on GM’s branding problems and releasing it the week when GM’s about to hold a board meeting to discuss, in very real terms, the future of a company under siege from a rogue shareholder is akin to discussing the the color of Monica Lewinski’s dress, rather than the color of the stain: what you’re reporting is quite possibly true, but completely irrelevant and overshadowed by the news of the day.

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Via Jalopnik, a NYT article quoting a “source” from Tracinda on the whole GMRN alliance.

The G.M. board “has an obligation to look at it, even if management doesn’t want to look at it,” a representative of Mr. Kerkorian’s Tracinda Corporation, who insisted on anonymity, said today.

Mr. Kerkorian “thinks the board ought to look at every possibility, and he’s expecting the board to do the right thing,” meaning to explore the proposed $3 billion alliance with open minds, the Tracinda representative went on.

But if General Motors managers persuade the board not to hold discussions with Renault and Nissan, “then he’d be very disappointed by that, and he might have to react,” he said, referring to Mr. Kerkorian. The Tracinda representative did not elaborate.

Is Kirk in the mafia now?

Hit the NYT link. More interesting reading on the whole drama.

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As mentioned previously, I’m yet to read anything that states, in plain terms, what the perceived benefits are for GM, Renault or Nissan in this whole alliance thing. That makes me think that this is more about corporate politics than product.

Pete De Lorenzo, the AutoExtremist, sums up my thoughts on what this is all about in his usual, succinct manner:

Make no mistake – this isn’t about creating a new global automotive powerhouse well-equipped to do battle deep into this century, one that will keep Toyota from taking over the world. And this certainly isn’t about doing what’s best for General Motors and the people who have so much invested in the fortunes of the company. And this in no way, shape or form has anything to do with solidifying America’s manufacturing base or shoring up the economy.

No, this is about flat-out greed, pure and simple.

As always, Pete D is essential reading.

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From Automotive News’ daily email alert:

General Motors’ management plans to air arguments against a proposed three-way alliance with Nissan Motor Co. and Renault SA at a meeting with its board on Friday, the Wall Street Journal reported. Wagoner and his management team intend to treat the alliance proposal as a hostile move against management, the sources said.

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After the jump, I’ve reproduced an email that I just received as I was putting this together. It’s a pretty detailed rundown on all the commentary that’s been going back and forth. Plenty there for all those interested in this whole alliance thing.

KERKORIAN IGNITES STRONG REACTIONS TO GM-NISSAN-RENAULT ‘ALLIANCE’

GM’s formal answer to billionaire investor and major GM investor KIRK KERKORIAN’s proposal for a three-way alliance with RENAULT and NISSAN should be announced shortly following a board meeting tomorrow (July 7).

Meanwhile, GM chief RICK WAGONER and NISSAN-RENAULT chief CARLOS GHOSN will meet in Detroit in mid-July.

GM shares jumped nearly nine per cent on the day (June 30) MR KERKORIAN said RENAULT and NISSAN were interested in including GM in their alliance, but fell marginally the next trading day — in part because of GM’s expected poor June sales results.

The London Financial Times reported this week GM has set up a high-level task force under finance chief FRITZ HENDERSON to investigate the merits of the deal.

In a letter to MR WAGONER on June 30 MR KERKORIAN’s investment firm, led by GM board member JEREMY YORK, said NISSAN and RENAULT were receptive to buying “a significant minority interest”. GM indicated it would consider the proposal, and NISSAN and RENAULT said they were open to expanding their alliance if GM’s board approves. The letter said a partnership could create “tremendous engineering, manufacturing and marketing synergies.”

Analysts say the ball is now in the NISSAN-RENAULT court, with each reportedly considering buying 10 per cent of GM’s shares. If NISSAN-RENAULT follow through, the game could change. Both companies would gain influence as shareholders to push their objectives. Even if GM resists, the pressure could mount on management to do more. Ultimately, a partnership could come down to a proxy vote, just as it did in the 1998 union between DAIMLER-BENZ and CHRYSLER.

In a statement, NISSAN said: “The RENAULT-NISSAN Alliance is an open partnership, which has never been restricted to two partners. Under the right circumstances and with the appropriate partners, the alliance could be expanded further.”

Also, in a statement, RENAULT said: “At this point, it is necessary that the GM board and top management fully support this project in order to start the study of this opportunity after the agreement of RENAULT and NISSAN boards”.

Under their existing partnership, RENAULT owns a 44.4 per cent stake in NISSAN, which in turn, owns a 15 per cent stake in RENAULT.

MR GHOSN – now being seen as a potential WAGONER replacement — says he is open to opportunities about alliances involving capital exchange, but adds: “If there is only one rule: It has to be win-win. What’s in it for me and what’s in it for you?”

In February MR GHOSN said: “You can make companies work together even if they are on different continents. One company does not need to take over the other, nor is it crucial for both companies’ cultures to meld into one. Preserving distinct styles helps each company’s employees identify with their employer and stay motivated”.

Meanwhile, industry expectation of consolidation among the majors continues to grow. Last year, 51 per cent of automotive executives reported in KPMG’s annual survey that they expected consolidation in the industry — up from 35 per cent of the executives in 2004.

But all is not well in the NISSAN-RENAULT camp. NISSAN’s US sales fell 5.6 per cent in the first half of 2006; RENAULT expects earnings to slip to 2.5 per cent of sales this year from 3.2 per cent.

In February MR GHOSN unveiled a “commitment” to increase sales by a third and raise RENAULT’s operating-profit margin to a record six per cent in 2009. And he has forecast a seventh record profit for NISSAN this fiscal year.

Meanwhile, France’s INDUSTRY MINISTER FRANCOIS LOOS warned this week: “This has to be approached with enormous caution. The United States is an immense market, a complicated market and GENERAL MOTORS is in a difficult situation because of problems that have nothing to do with cars. We should be extremely cautious. This shouldn’t be taken as a done deal, it’s an idea.”

And there is scepticism being expressed by major rivals. DAIMLERCHRYSLER chief DIETER ZETSCHE says: “Sometimes the news in itself is already the purpose, not necessarily leading to further results”. HONDA president TAKEO FUKUI says: “Considering the next 10 years, I think technologies and brand are more important than the size of a company in global auto industry competition. I feel a bit sceptical.”

TOYOTA chairman FUJIO CHO says: “The auto industry is rapidly globalising and the move toward alliances is going to go on for some time”.

And Internet bloggers have their say:

* “This is all smoke and mirrors. The folks who have decided how the GM saga is going to play out for the public are putting on a show. The script is written, it may be changed a bit here and there, but there is no way GM can/will ever ‘come back’ as it is. This is an even more transparent hustle than TYCO or ENRON or WORLDCOMM, or….”

* “This is nothing more than a stock pump and dump for KERKORIAN. GHOSN is nothing but slash and burn cost cutter like CHAINSAW AL DUNLAP! Don’t see this deal happening….”

News agencies and media have a say:

London Financial Times: “An alliance could give it almost a quarter of global car sales and an unmatchable research and development budget. RICK WAGONER has already had talks with CARLOS GHOSN who, on Monday, was given power by the carmakers’ Tokyo and Paris-based boards to negotiate a deal. They are due to meet in Detroit this month, according to people familiar with the plan.

“So far, details of the proposal are vague, having been discussed only at outline level between the companies and KIRK KERKORIAN, who has a 9.9 per cent stake in GM. But people familiar with the talks say MR GHOSN indicated to MR KERKORIAN two weeks ago that RENAULT and NISSAN could buy 20 per cent of GM between them, injecting cash but falling short of a full merger, which would be fraught with difficulties.

“GM directors will be pressured on Friday by JERRY YORK, the board appointee of MR KERKORIAN, to set up a board committee to consider the alliance. The special board meeting was already planned to discuss the restructuring plan, GM said, but the RENAULT-NISSAN deal has been added to the agenda”.

KYODO: “A three-way partnership would create a mammoth automotive group with an annual output of more than 15 million vehicles”.

BLOOMBERG: “KIRK KERKORIAN’s TRACINDA — GM’s fourth-biggest investor — has lost confidence in RICK WAGONER’s plan to fix GM, according to a person familiar with TRACINDA’s strategy. KERKORIAN, who made billions investing in automakers and airlines, wants either a GM alliance with CARLOS GHOSN’s NISSAN and RENAULT, or a faster alternative to WAGONER’s plan to recover from $10.6 billion in 2005 losses, said the person, who asked not to be identified because TRACINDA isn’t discussing its plans.

“A decision by GM’s board to study an alliance with GHOSN could be a setback for WAGONER, who has insisted that shutting factories, eliminating 30,000 union jobs and designing new vehicles more cheaply is enough to restore the world’s largest automaker to financial health.

“KERKORIAN, 89, is frustrated with the slow pace of change so far at Detroit-based GM, the person said. WAGONER, 53, has been unable to stop steady erosion in sales in the US, where TOYOTA and other Asian competitors last year grabbed record market share while GM’s portion fell to the lowest since 1925…..

“In mid June, KERKORIAN, YORK and GHOSN discussed over dinner at a Nashville, Tennessee, restaurant the possibility of RENAULT and NISSAN each acquiring about a 10 per cent stake in GM, a person familiar with the meeting said last week. If the two automakers bought that much GM stock, their holdings and those controlled by MR KERKORIAN together would be twice as large as that of GM’s biggest shareholder, STATE STREET, according to data compiled by BLOOMBERG from regulatory filings.

“YORK, the KERKORIAN adviser and GM board member, later told WAGONER about the Nashville dinner and GHOSN’s possible interest in acquiring as much as a 20 per cent stake in GM, according to the person familiar with the KERKORIAN-GHOSN meeting”.

BLOOMBERG: “CARLOS GHOSN is battling shrinking profit at RENAULT and falling sales at NISSAN. A proposed investment in GENERAL MOTORS by the two automakers he runs may stretch him too thin”.

New York Times: “People familiar with GM executives’ thinking said the company was not likely to be in any rush to give RENAULT and NISSAN an answer. The company’s caution is understandable. GM has been stung in the past by alliances, like a deal with FIAT that GM had to pay FIAT $US2 billion to escape and the ventures with Japanese companies like SUZUKI and FUJI HEAVY INDUSTRIES, the parent of SUBARU. Moreover, the strongest automotive players, like TOYOTA, HONDA and BMW, are independent companies without the complications that such ventures can create.

“People with direct knowledge of the matter say the proposal for a 20 per cent stake was made by GHOSN to KERKORIAN at a dinner in Nashville, Tennessee, where NISSAN broke ground for a headquarters building. Although GHOSN has declined to offer opinions on how GM should address its problems, he has told associates that he could return the world’s largest automaker to profitability, just as he did with NISSAN”.

Business Week: “Sources say WAGONER feels threatened by the possibility. There may be good reason. YORK has publicly expressed his admiration for GHOSN and his quick turnaround at NISSAN. The former IBM and CHRYSLER chief financial officer has also made rapid-fire suggestions for how to fix GM, suggesting dissatisfaction with WAGONER’s leadership. GM, RENAULT, and TRACINDA have declined comment beyond the statements released June 30.

“YORK’s power play could be a TROJAN horse strategy, promising the gift of engineering synergies in an alliance but ultimately moving to bring in new leadership at GM. If GM’s board buys into the idea and RENAULT gets a large minority stake, at the very least GHOSN will almost certainly get a seat on the board. Once he gets his nose under the tent, the possibility of GHOSN taking a bigger role becomes more than YORK’s wishful thinking.

“GM’s board will meet by teleconference on July 7. And if they agree that they should try to forge a deal with GHOSN’s alliance, then GM’s directors will at least open the door for a possible change in management. Depending on how the situation plays out, this could be the biggest threat to the career and leadership of WAGONER”.

Analysts have a say:

SHINKO SECURITIES analyst SHINJI KITAYAMA: “GHOSN commands such symbolic significance as a reform specialist. If GM management can’t do the job, why not let GHOSN give a try in leading the company? That’s the message.”

COMMERZ INTERNATIONAL CAPITAL MANAGEMENT (JAPAN) chief HITOSHI YAMAMOTO: “GM is surrounded by very big and very American problems. Trying to manage a three-way alliance may be too much, but if he can, he will become an auto industry legend”.

MORGAN STANLEY analyst ADAM JONAS: “CARLOS GHOSN is an agent of change. He did things in Japan nobody thought could be done. GM needs management, product and direction. GHOSN has a strong track record here … GHOSN’s always said he wants to take the worst jobs, the jobs no-one else wants. And RENAULT [where he took over as chief executive last year] is not really a CARLOS GHOSN-style Mission Impossible…. “One of RENAULT’s best assets, if not the best asset, is CARLOS GHOSN himself,”” But MR JONAS also noted: “GHOSN’s reputation isn’t flawless anymore in Japan. Maybe it’s time he handed over NISSAN to someone else….

SANFORD BERNSTEIN analyst STEPHEN CHEETHAM: “If RENAULT were ever to contemplate a return to the US, NISSAN already offers sufficient infrastructure to act as a platform.”

T. ROWE PRICE GROUP analyst DAVID GIROUX: “I don’t see how GM could or would say no to this unless GHOSN were trying to take effective control, and I don’t think that’s what’s going on. GHOSN’s talking about taking a minority interest. There’s going to be manufacturing, engineering and distribution synergies that should benefit everybody”.

Consultancy firm CSM chief CRAIG CATHER: “The primary driver behind this is going to be cost, both on the development side and manufacturing. If this does transpire, there will be a lot of internal battles over who will control specific platforms and programs”.

Veteran automotive industry analyst MARYANN KELLER: “NISSAN is not in such great shape. NISSAN’s market share is falling in Japan. NISSAN has not achieved its own sales forecast in the United States, has a lot of quality problems … and RENAULT is a mess”.

WAYNE STATE UNIVERSITY LAW SCHOOL corporate law professor PETER HENNING: “Can FORD survive in the global marketplace? That’ll be the next question, if GM goes in that direction (an alliance).”

Author of books on MR GHOSN and MR FORD, DAVID MAGEE: “I couldn’t have been less surprised (about the alliance proposal). This is the 21st Century.”

MR KERKORIAN’s lawyer TERRY CHRISTENSEN: “It would be an amazingly important alliance… The value for the shareholders will be there. But more importantly, the accomplishment and the strength it would give GM, and the long-term health it would give GM, would be a big part of this.”

CREDIT SUISSE analyst KOJI ENDO: “For NISSAN to invest in GM right now is going to be a big risk for the NISSAN-RENAULT alliance because it will probably take a decade for GM to revive and be a complete partner. The risk is huge but if it works out the return is going to be massive”.

CENTER FOR AUTOMOTIVE RESEARCH chief DAVID COLE: “These guys (KERKORIAN, YORK and GHOSN) are players, and they want to play at the big league “.

MIZUHO SECURITIES’ analyst YOSHIO WATANABE: “We are not opposed to a (three-way) partnership in itself, but the risks, including the burden on (NISSAN’s) finances and a possible cannibalisation of sales in various markets, must be weighed carefully”.

UNIVERSITY OF MICHIGAN professor of management and former chief of AMERICAN MOTORS, GERALD MEYERS: “It’s going to put pressure on WAGONER, an unwelcome pressure. He doesn’t need another voice in the boardroom, and he isn’t going to want to share his successes so far with someone else. It puts a dent in his dream of pulling GM out of its troubles with his current management team…. (But) GM is not coming around fast enough, the stock price has not moved favourably, and JERRY YORK has convinced KERKORIAN to take some action to get the stock price moving and transform the company faster.”

GEORGIA TECH accounting professor CHARLES MULFORD: “WAGONER’s future depends on his ability to turn things around at GM. I don’t know that a major purchase by NISSAN will change that. I think it will be wait and see. He’s having some success with these union contracts and he’s getting the accounting problems cleaned up. You just don’t do anything overnight; you wait and see how he’s doing.”

McTEVIA & ASSOCIATES chief JIM McTEVIA: “I don’t think RICK WAGONER is going anywhere. He has the support of the board, management and Wall Street and has proven he can perform under adverse circumstances”.

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