General Motors, Renault And Nissan
Terminate Alliance Discussions
General Motors, Renault and Nissan
said today that they had agreed to terminate discussions
regarding a proposed alliance among the three companies.
The parties mutually recognized
that significant aggregate synergies might result from the
alliance. However the parties did not agree on either the total
amount of aggregate synergies or the distribution of those
benefits.
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.
Rick Wagoner, General
Motors Chairman and CEO, gave the background of GM's decision :
"... We differed in one
area on the valuation of the synergies … but even in
that area, we agreed on the relative distribution of the
synergies.
… As it turned out, we all
agreed that the synergy levels were significantly in
favor of Renault and Nissan.
… 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.
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.
They offered us the right to
acquire stock in their companies, as well.
In the end, following a
comprehensive review and discussion, the GM Board
determined that the alliance structure proposed by
Renault-Nissan was not in the best interests of our
stockholders.
This vote was unanimous and
followed a comprehensive process that included advice from
outside financial advisors. The Board rejected the proposed
alliance taking into consideration its impact on stockholder
value, especially in three areas:
No premium
to recognize Renault-Nissan’s disproportionate share of the
synergies;
No premium
for the purchase of a significant minority stake in our company;
And the
fact that the proposed structure effectively would have blocked GM
from pursuing other alliances, without adequate compensation.
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, it’s fair to say that the
proposed broad-based alliance model would represent a significant change
in the way we are running our business.
It would have potentially been a
distraction to our current turnaround efforts. For example, it
unfortunately doesn’t help in key areas like our huge U.S. legacy cost
competitive disadvantage, and it could impede our fast-moving efforts to
evolve to a global management system.
We felt that the complexities of working
with three companies could, in fact, slow us down.
... And, there was also concern about the
skewed distribution of the synergies potentially providing significant
advantage to an important competitor. "
