Kerkorian calls on GM to look into joining the alliance between Nissan and Renault. The latest inflation gauge indicates a tame rise in prices.

General Motors (GM, news, msgs) jumped more the 12% and pushed the Dow and the broader market higher in early trading after the automaker's largest shareholder publicly called for the company to consider joining an alliance between Nissan and Renault.

Kirk Kerkorian's Tracinda investment vehicle, which owns 9.9% of GM, said in a regulatory filing that GM should establish a committee to explore joining the Nissan/Renault alliance.

Carlos Ghosn, chief executive of both Nissan and Renault, recently had dinner with Kerkorian, at which Ghosn indicated a desire to speak with GM about joining the alliance and about buying a 20% stake in GM, CNBC's David Faber reported, citing people close to the situation. Such a deal would inject $3 billion in much-needed equity into the automaker, Faber said.

The Renault and Nissan partnership began in 1999 and is considered a huge success, with Nissan's profit margin now the highest in the industry.

NEW YORK (AP) -- Automakers Renault SA and Nissan Motor Co. are interested in purchasing a significant stake in General Motors Corp. and including the struggling Detroit company in their alliance, according to a letter sent Friday to GM from billionaire investor Kirk Kerkorian's investment company.


Shares of GM increased $1.20, or 4.4 percent, to $28.64 in morning trading on the New York Stock Exchange after the news.

The letter from Kerkorian's investment company, Tracinda Corp., said the company believes Renault and Nissan are receptive to the idea of including General Motors in their partnership and purchasing "a significant minority interest" in the Detroit automaker.

Tracinda, a large minority shareholder in GM, said the existing French-Japanese partnership has created "tremendous engineering, manufacturing and marketing synergies, resulting in substantial benefits and cost savings to both Renault and Nissan."

Tracinda urged GM's board to form a committee to "immediately and fully explore this opportunity together with management," as it feels the alliance could help GM "realize substantial synergies and cost savings and thereby greatly benefit the company and enhance shareholder value."

GM, in a statement, said the Tracinda request "will be taken under advisement" by its board of directors. The automaker said it has not received any offers or proposals from Renault/Nissan about an alliance. GM said it would have no further comment.

Tracinda owns 9.9 percent of GM's common stock and is GM's third-largest shareholder. Kerkorian has pressured GM to take aggressive steps to restore profitability and his top aide, Jerome York, was elected to GM's board earlier this year.

The letter also indicates that Tracinda has reached out to Renault Chairman Louis Schweitzer and Nissan Chairman Carlos Ghosn to alert them to its contact with General Motors.

In a separate letter advising Schweitzer and Ghosn of the GM correspondence, Tracinda noted that "as we recently discussed with Mr. Ghosn, Tracinda believes that General Motors, Renault and Nissan should explore a three-company, partnership-based alliance."

Officials with Renault and Nissan declined comment.

Renault owns a 44.4 percent stake in Nissan, which in turn owns a 15 percent stake in Renault. Nissan was on the brink of bankruptcy when Ghosn was dispatched by Renault to lead the Japanese company in 1999. The Brazilian-born Ghosn engineered a cost-cutting and morale-boosting campaign that revived the automaker.

June 30 (Bloomberg) -- Kirk Kerkorian's Tracinda Corp. asked General Motors Corp.'s Chief Executive Officer Rick Wagoner to explore a three-way partnership with Nissan Motor Co. and Renault SA.

Tracinda, which holds 9.9 percent of GM shares, said in a letter to Wagoner today that the partnership would ``strengthen the competitive positions of all three companies.'' GM shares and bonds rose.

Today's disclosure heightens Kerkorian's pressure on GM, the world's largest automaker. The billionaire labeled his initial stake in GM 14 months ago as being ``solely for investment purposes.'' He allowed adviser Jerome York to call in a Jan. 10 speech for a faster restructuring at the automaker. York was named a GM director in February.

``Kerkorian wouldn't have written the letter if Renault and Nissan hadn't spent a fair amount of time thinking about this,'' said John Casesa, an auto analyst at New York-based Casesa Shapiro Group LLC. ``The point of Kerkorian's letter today is that GM's largest individual shareholder is turning up the heat on management to accelerate the improvement in results.''

GM shares rose $1.30, or 4.7 percent, to $28.74 at 10:44 a.m. in New York Stock Exchange composite trading after gaining 11.4 percent earlier. GM's 8.375 percent bond due July 2033 rose 1.6 cents on the dollar to 78.5 cents on the dollar and its yield fell to 10.85 percent from 11.08 percent, according to Trace, the bond-price reporting service of the NASD.

GM Response

GM, in a statement, said Tracinda's proposal ``will be taken under advisement'' and declined to comment further. GM said it ``has received no offer or proposal'' from Renault and Nissan. Claire Martin, a spokeswoman for Renault, which holds a 44 percent stake in Tokyo-based Nissan, declined to comment. A message left with Nissan spokesman Tim Gallagher wasn't immediately returned.

GM lost $10.6 billion last year and is closing plants, selling assets and buying out workers in an effort to return to profit.

Tracinda included a copy of its letter to Wagoner, dated today, in a U.S. regulatory filing. The letter said it ``is our understanding'' that Renault and Nissan ``are receptive'' to forming an alliance with GM and ``purchasing from General Motors a significant minority interest'' in the Detroit-based automaker.

An alliance could provide GM ``substantial synergies and cost savings and thereby greatly benefit the company and enhance shareholder value,'' the Tracinda letter said. Tracinda urged GM directors to form a committee to ``immediately and fully explore this opportunity together with management.''

Considering Acquisitions

At the French carmaker's annual meeting on May 4, Chief Executive Officer Carlos Ghosn said the company may consider acquisitions under the right circumstances. He was responding to a shareholder's question on whether Renault is interested in buying General Motors Corp.'s Saab car brand.

``The industry is not doing well, and when that is the case, development, partnerships or purchases can be had more cheaply and we will be watching very closely'' for opportunities, Ghosn said.

The Tracinda filing also included a copy of a letter to Renault and Nissan. That letter says Tracinda ``recently discussed'' the idea of an alliance with Ghosn, who is also CEO of Nissan.

``Tracinda believes that General Motors, Renault and Nissan should explore a three-company, partnership-based alliance,'' the second letter said. ``Tracinda believes that such a global alliance has the potential to materially strength the competitive position of all three companies.'' Tracinda holds 56 million GM shares.

``It may not be good for Wagoner, but it would be good for GM,'' said Brian Bruce, who helps manage about $18 billion at PanAGora Asset Management in Boston, including GM shares. ``At this point, they don't appear to have the right answers. Anything that looks like change for the positive would be good.''

SAN FRANCISCO (MarketWatch) -- Renault and Nissan convened board meetings Monday to mull the prospects of aligning with General Motors Corp. after billionaire Kirk Kerkorian last week urged the U.S. automaker to consider forging a three-way global partnership.

Shares of Dow Jones Industrial Average component GM (GM : General Motors Corporation

12:50pm 07/03/2006

Shares of Dow Jones Industrial Average component GM (GM29.47, -0.32, -1.1%) gave up some of the prior session's gains, finishing the holiday-shortened session down 1.3% at $29.41.

Carlos Ghosn, Renault-Nissan's chief executive and turnaround specialist, chaired a meeting of the Nissan board to discuss Kerkorian's overtures, which came in the form of a letter from his Tracinda investment group last week. See full story.
'GM's problems in North America are also largely related to revenue and brand issues, which Nissan and Renault can't help.'

— Rod Lache, Deutsche Bank

The board approved that Nissan (NSANY : nissan motors sponsored adr
News , chart, profile, more
Last: 22.19+0.21+0.96%

NSANY22.19, +0.21, +1.0%) should proceed with exploratory discussions concerning a potential alliance with Detroit-based GM, if the world's biggest carmaker supports and endorses the proposal.

The board also gave Ghosn, who is credited for successfully breathing life into both Nissan and tire company Michelin, the necessary powers to conduct any discussions and negotiations relating to a potential linkage.
French carmaker Renault (FR:013190: news, chart, profile) will also hold a board meeting later Monday to discuss the possibility of bringing GM into its Nissan partnership, a spokesperson said.

Meanwhile, Wall Street chimed in with an approving nod. Banc of America Securities upgraded GM to neutral from sell, citing the anticipation of value flowing from a transaction with the Japanese and French automakers.

Analyst Ron Tadross raised his stock price target on GM to $30 from $15. He said he believes an alliance with Renault-Nissan is more likely than not to happen and would equate to a positive management infusion that could yield benefits over the short to medium term.

Not everyone, however, was convinced that a new marriage will fix what's wrong with GM. Deutsche Bank analyst Rod Lache said that, while the deal could have a positive impact on GM's strategic directions, the crux of the company's decline would likely remain.

"GM's problems in North America are also largely related to revenue and brand issues, which Nissan and Renault can't help," he said, reiterating his sell rating. "GM needs more substantial changes to its North American business model."

Shawn Langlois is a reporter for MarketWatch, and the editor of its community message boards.

Compared to Renault and Nissan? Like which products?

I agree about profitability. But the "new GM" so to speak, just bore fruit. It just started. We will know about profitability in about a year or two from now. Nissan's rejuvination has been going on for a few years now. Plus Nissan does not have the benefit-related costs the GM has due to different country laws.

They ARE turning around. For GM to turn around it will take longer than any other comapny would, and a TON longer than Nissan due to the size of GM. IT's only natural.

Nissan's execs that helped with the turnaround should not be perceived as being able to turn GM around in a theoritical situation. The reason? Different situation. Totally. Just because Gohsn turned a company around in Japan, that does not mean he can do it with a company so many times larger, in the USA. Maybe he can, but not necessarily.

Plus, if anyone think that the benefit of a GM-Nissa/Renault alliance would be Nissan/Renault's mgt's ability to turn things around, you dont have to make an alliance with a company for that, all you have to do is lure a few people away and you have achieved your goal with a lot less "luggage to carry around".

Nissan's execs that helped with the turnaround should not be perceived as being able to turn GM around in a theoritical situation. The reason? Different situation. Totally. Just because Gohsn turned a company around in Japan, that does not mean he can do it with a company so many times larger, in the USA. Maybe he can, but not necessarily.