Nissan-Renault, Ghosn back to square one after GM talks fail
Nissan-Renault, Ghosn back to square one after GM talks fail
By TAKUYA KARUBE
Kyodo News
The unsuccessful talks on an alliance involving Nissan Motor Co., its partner, Renault SA, and U.S. auto giant General Motors Corp. has left Carlos Ghosn, head of the Japanese-French carmaker, looking for a way to deal with slumping sales.
Initially, the three-month negotiations were seen mainly as an effort to revive ailing GM, the world's-largest automaker. The idea of a three-way tieup was suggested in late June by major GM shareholder Kirk Kerkorian, who has expressed frustration with the U.S. automaker's poor sales.
But the talks also cast a spotlight on Nissan-Renault's struggle to map out a convincing growth strategy.
The American billionaire's proposal came at a time when Ghosn was considering how to solidify the turnaround he engineered at Japan's No. 2 automaker.
Since taking the helm of Nissan in 1999, Ghosn not only saved the company from near bankruptcy, he succeeded in restoring the marque's lost luster.
Ghosn owes his success to a bold restructuring plan that included slashing the number of employees and closing factories, steps that were considered radical in Japanese business until recently.
But many analysts point out that Nissan has squeezed out about as much as it can on the cost side and must now focus more on coming up with hot new cars.
On Oct. 5, the day after the three automakers announced their talks had ended without agreement, Nissan shares rose for the first time in three days on the Tokyo Stock Exchange, climbing 3.47 percent or 46 yen to end the day at 1,369 yen.
"The market was dominated by the view that Nissan needs to prioritize its efforts on turning around domestic sales," said Kazuhiro Takahashi, equity planning chief at Daiwa Securities SMBC Co.
Takahashi said the collapse of the talks also eased fears among some investors that Nissan might become mired in GM's financial troubles.
Osamu Kobayashi, a director at ratings agency Standard & Poor's who monitors the Japanese auto industry, said a tripartite alliance between Nissan, Renault and GM was seen as more challenging than the tieup between the Japanese and the French automakers.
"The Nissan-Renault alliance went well because (the two were) complementary to each other regionally," Kobayashi said, noting the automakers were not rivals in the Japanese or European markets.
"But the situation was complex this time" because GM competes with Renault in Europe and with Nissan in North America.
Kobayashi said S&P has no immediate plan to change Nissan's financial rating because with the end of the talks, the company has "just returned to the point where it was" in July.
Nissan and Renault tried to present the mooted partnership as a way of helping the three automakers save billions of dollars through joint procurement of auto parts, but the U.S. automaker concluded the costs outweighed the potential benefits.
In contrast to recent signs of improvement at GM, Nissan, which is 44 percent owned by Renault, is finding it difficult to lay out a road map for growth.
According to the latest available data released Sept. 25, Nissan's domestic sales skidded 16.6 percent from a year earlier to 45,723 vehicles, its 11th straight monthly decline.
Nissan's exports fell for the fifth consecutive month. Its global output was down 8.9 percent, while domestic production sank by 15.2 percent. Production has now fallen for eight months in a row, year on year.
S&P's Kobayashi said he expects sales at Nissan to rebound with the launch of eight new models around the world in the second half of this fiscal year ending in March.
In the first six months of the fiscal year, Nissan introduced only one new model.
"What's worth seeing is how far its sales will pick up," Kobayashi said, adding that this will be the true test of strength at the automaker.
In August, Toyota Motor Corp., which is expected to overtake GM as the world's largest car company in the near future, said its exports, including those of group firms Daihatsu Motor Co. and Hino Motors Ltd., rose 47.1 percent compared with the previous year, their ninth straight monthly rise.
To get Nissan firing on all cylinders again, Ghosn and Nissan executives believe it is important to find a North American partner.
There has been speculation that Ford Motor Co., which has financial troubles of its own, may begin negotiating with Nissan-Renault.
But analysts warn that a tieup between Nissan-Renault and Ford will not be a panacea.
Even if the GM alliance had gone ahead, Itaru Koeda, cochairman of Nissan, told Kyodo News last month he believed the tieup would not lead to an immediate increase in earnings.
"It will take at least three years to bear fruit, even if we decide to carry out projects through an alliance with GM," Koeda said of the proposed alliance.
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