Kerkorian Urges GM tie-up with Nissan-Renault

Posted 01 July 2006 @ 12:12 am EET     Print     Reprint     E-Mail     Comments

Detroit (Reuters) - Billionaire investor Kirk Kerkorian urged General Motors Corp. on Friday to consider a three-way partnership with Nissan Motor Corp. and Renault SA, sending shares of GM higher on prospects for a speedier turnaround.

Click to Enlarge Billionaire investor Kirk Kerkorian urged General Motors Corp. on Friday to ...

Through his investment arm, Tracinda Corp., Kerkorian pushed GM to form a committee to "immediately and fully explore" a partnership under which Nissan and Renault would buy a "significant minority interest" in the automaker. Renault, based in France, has a controlling 44-percent stake in Nissan of Japan. Tracinda's suggestions came in a letter to GM Chief Executive Rick Wagoner.

Renault and Nissan declined to comment. GM said it had received no offer from the other two automakers but that its board would consider Tracinda's request. The proposal shocked analysts and investors and opened up the prospect of a cash infusion for GM, which has been facing heavy labor costs and declining market share in the United States as it undertakes a massive restructuring. The world's largest automaker lost $10.6 billion in 2005.

Such a partnership also promises future cost savings on product development and a closer association with Carlos Ghosn, who is credited with driving Nissan's turnaround and now heads Nissan and Renault. David Kudla, chief executive of Mainstay Capital Management, said the partnership could provide GM with $3 billion dollar in cash and a "potentially rewarding" strategic alliance.

"GM could potentially benefit from Carlos 'Icebreaker' Ghosn ... depending on the level of his future involvement in GM," Kudla said. Others were uncertain about the prospect of the success of the proposal, but said it demonstrated the activism of Kerkorian, who, owns about 10 percent of GM through Tracinda.