By on July 21, 2006

news_infigcc01222.jpgWhy in the world would General Motors want to hitch their wagon to Renault – Nissan?  Synergy?  Don't make me laugh.  I reckon the answer is simple: GM's Board of Bystanders and CEO Rabid Rick Wagoner aren't interested in hooking-up with Carlos "The Jackal" Ghosn's mob.  They gotta pretend to be interested on account a due diligence.  Lest we forget, Kirk "The Quiet Lion" Kerkorian launched this whole cockamamie scheme to inflate GM's stock price so he could recoup his $1b loss.  Done.  But now Nissan says it ain't giving GM a dime, no matter what.  Which takes the deal from dumb to dumberer ('cause the one thing GM could use from the Franco-Japanese conglomerate is cash money.)  OK, great.  But here's my question: why did Nissan – Renault play along with Kirk in the first place?  Do we really believe Carlos' claim that he wants to bulk-up against Toyota?  Did Kirk promise him a shot at running the world's largest potential bankruptcy?  I'd appreciate a little help parsing this bastard.  Your thoughts? 

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29 Comments on “QOTD: Ghosn fishing?...”


  • avatar
    NN

    Here’s a thought…they want to scare the shit out of Toyota and their plans to become the world’s #1 this year…which may foster an overreaction on Toyota’s part by encouraging them to partner up with GM…thus giving Toyota a huge deadweight liability that allows Nissan/Renault to eventually become the more successful enterprise. Toyota has it’s eyes on the prize right now, and Ghosn could be employing some shrewd bait and switch tactic.

  • avatar

    You’re over-thinking it. I think.

  • avatar
    geozinger

    I think it is what it is.

    Kirk was looking to get his money back out of GM and these guys were his pawn in that maneuver.

    GM+Nissan/Renault=bad deal. It absolutely makes no sense. GM has everything it needs, and a few things it doesn’t. You could probably say the same thing about N-R.

    There are no ‘synergies’ to be exploited. There have been no great advances in automaking in the last couple of weeks, neither N-R or GM have suddenly come up with some ‘thing’ that the automotive buying public really wants, who’s kidding who here?

    Maybe the ‘Quiet Lion’ should have invested in GMAC. Once it sells, he could get his money, then.

  • avatar
    dhathewa

    Farago wrote, “I’d appreciate a little help parsing this bastard.”

    Which bastard? This story has a wide variety of bastards from which to choose.

    I will say this, if Kerkorian is the bastard you meant, it just must be nice to have so much money that you can coerce others into pulling you out of your own stupid mistakes at their expense.

  • avatar

    I agree with your assessment of Mr. Kerkorian (coerce is a lovely word), but I was referring to the Nissan – Renault angle.

  • avatar
    Glenn Arlt

    I know I have a bizarre sense of humor, however, as soon as this photo came up on my screen, my brain registered “To Infinity, And Beyond!”

    Hey, that’s a thought. GM should get Tim The Toolman Taylor to run the biz instead of the Frenchies. At least he’s a car guy.

    He sure couldn’t do a WORSE job than the current bunch of bozos.

  • avatar
    Terry Parkhurst

    I have never met Carlos Ghosn in person; however, I have written about Nissan business, product and financial matters for over five years, for Sport Z magazine (which just ceased publication a month ago, and is being morphed into Nissan Sport, with the able Dave Bexfield still at the helm as editor). And like Robert, I have been following the events surrounding this proposal of merging GM with Renault-Nissan closely.
    My hunch is there is more to it than might meet the eye. I believe that Carlos Ghosn likes challenges. If he could indeed be the man that not only turned around Nissan but also General Motors, what a legacy, eh?
    Off the top of my head, I think what Nissan might get from this is good public relations, if Mr. Ghosn can stave off shuttering some GM factories. But he is, after all, a man for whom the old NASA saying, “Failure is not an option” applies. He would only be part of some merger, or more realistically an acquistion – think DaimlerChrysler here – if it would be a success.
    To my mind, it’s akin to the hunches going around about whether or not “An Inconvenient Truth” is a Trojan horse for another run by Al Gore for president. Having run twice before and lost – how many people remember he ran in 1988? – Mr. Gore likely won’t run again unless he knows he can win.
    As F. Scott Fitzgerald said, “In America, there are no second acts.”

  • avatar
    geozinger

    Terry Parkhurst,

    While I gather you’re rather familiar with the Nissan world, how could an alliance/merger/shotgun wedding with GM stave off shuttering GM factories? Look at recent history of auto manufacturing in the southern part of the US. BMW, Mercedes Benz, Hyundai, Nissan, even, have all built manufacturing capacity for very little (essentially).

    Why would N-R take on any existing GM facility anywhere (and their UAW workers) when they can build for near free in the South? I should state that I realize that it’s not really free, but those Southern states will just about throw money at manufacturers to get an auto plant in their state…

    I’ll grant you that Mr. Ghosn may like challenges, but this seems like an incredibly expensive way to get to the top of GM.

    I’m not seeing the benefits of this deal. Not that it really matters, I’m just some motorhead commenting on a blog, when I should be working… ;)

  • avatar
    yournamehere

    i dont think a merger is going to be as complete as some are seeing it. I think it will be more along the lines of Chrysler-Mitsubishi or Porsche-VW. They will work on a few projects together and share development costs. i dont think your going to see a cobalt with a nissan badge. though in the future you may see a cobalt and a sentra share platforms and engines. Though I think the main motivation is to get captain Kirk his money back. I don???t think Ghson really wants to run a dieing/dead company when he has a company of his own that is doing pretty well.

  • avatar
    CellMan

    Kirk wanted to make his money and Carlos wants the chance to be the saviour of GM. Kirk’s angle is only financial greed at all costs whereas Carlos finished with saving Nissan wants a new challenge to fix. And Carlos would rather do that than fix his real problems of running the day-to-day operations of a troubled Nissan/Renault who have serious problems now.

    The board of bystanders at GM have no choice, but to entertain the notion and perform their due diligence with lip service.

    I don’t think any sane person really believes such an alliance has any merit whatsoever.

  • avatar
    Happy_Endings

    From the Nissan-Renault perspective, I don’t think they want to piss Carlos off. He is CEO of both companies and I’m sure most people bow down to him everyday. If he were to go because they didn’t allow him to pursue this little project, they figure he might look to leave. If he leaves, they figure their organizations will resemble decapitated poultry. So from their perspective, they will just let him do this so he is happy.

  • avatar
    Terry Parkhurst

    You a good point, “Geozinger.” But as you might have heard by now, a Chinese company is going to be building the MG somewhere in Oklahoma, if things go right. Admittedly, they probably won’t have to deal with the UAW. My hunch is if Renault/Nissan did take over, or merge with The General, the head of the UAW would work hard to convince workers that there would be no other choice. And given what appears almost daily in the business pages of most dailies, and what has happened at Delphi, I don’t think he’d have to work very hard, in that regard.
    Again, for Mr. Ghosn it’s about the challenge. And that alone may be enough to see this deal through. Forbes magazine’s May 22 edition, as I recall, had an excellent personality portrait piece on Carlos Ghosn, that you might want to check out. Hope you don’t get caught looking at TTAC at work. Thanks for the response.

  • avatar
    Terry Parkhurst

    Correction: meant to write, “You make a good point” in earlier post.

  • avatar
    wstansfi

    This scene is vaguely reminiscent of a victorian novel.

    Imagine that you are an untitled, unlanded, immigrant entrepreneur in London in the 1800’s and your daughter is beautiful. Now imagine she gets wooed by a landed, titled, penniless lord. What can you do? Do you tell the guy he’s penniless and tell him to get lost? I don’t think so.

    Now imagine that you’re the penniless lord with land, history, and titles. Pretty girl with an up and coming father strolls into town? Your play is obvious.

    This is not to say that Nissan-Renault has no problems, just less than GM. Realistically, what does N-R have to loose by having lunch with GM? Or even spending the weekend with them? Especially if GM made the overture?

    Now imagine we’re GM – the corporate waters are swirling faster and faster – right now every option deserves considerable consideration – even ones that don’t necessarily make sense to the outside observer.

    Last, I agree with Terry – there are undoubtedly facts and information to which the public is not privy, thus limiting our insight into the true motives…

    Cheers,

    wstansfi

  • avatar
    Tiger Commanche

    The Kerkorian-Ghosn meeting is akin to the first time Isiah Thomas had dinner with Larry Brown. The only difference is that Isiah brought Larry on board, thereby beginning the New York Knicks Death Watch, and Kerkorian? Well, let’s just say he didn’t become a billionaire because of his ballin’ prowess.

    As a whole, the industry seems to gush too much over Ghosn, the almighty savior of Nissan. If Ghosn can be credited with anything it should be good timing, because Nissan had nowhere to go but up. With the application of the still high-tech VQ engine across nearly the entire product line, Nissan maximized their engineering skills and now enjoy a good return on their investment as R&D costs were undoubtedly recouped years ago. But I digress.

    How many other automotive executives are as instantly recognizable as Ghosn (besides Dr. Z whose commercials now seem to be on every 3.7 seconds)? Carlos provided the recognition, charisma and feel-good Jack-Welch-like success story Cap’n Kirk needed to quickly recoup some spending money. Mission accomplished. Pass me some caviar.

  • avatar
    chanman

    Maybe R-N is just feeling up the general’s pulse to see how much time it has left??

  • avatar
    Claude Dickson

    The interesting part about this merger is that it’s the first mega merger that no one buys, not Wall Street, not the public, no one. There just isn’t enough PR spin available in the world to make this merger appear sensible.

  • avatar

    All Smoke and Mirrors imho. Both bigwigs love to be make headlines and feel courted.
    Nissan needs GM’s woes like a fish needs a bicycle…

  • avatar

    BTW, it’s spelled Ghosn, not Ghson.

  • avatar
    kablamo

    What to say about this that hasn’t already been said…

    My question is, assuming Kerkorian is just doing this to make sure he doesn’t lose out on his investment (which he most certainly is), and that any kind of merger does not happen (which it most certainly won’t, I hope…), how WILL Kerkorian get his money back?

    Making money on this -realizing capital gains- is going to require that Kerkorian sells his GM shares. Isn’t that in itself an admission of everything we suspected, that GM really is hopeless, that the last hope (Ghosn) won’t touch it, that Kerkorian won’t be able to piece apart the company to great profit? What is he going to do, put 10% of the company up for sale in a day? The stock would freefall! Sell part of it one day then the rest a few months later? Again there would be another freefall, so Kerk might lose again. How can he justify this without creating a panic?

    Seems to me much of the current confidence in GM can be attributed to the fact Kerkorian saw potential – therefore the sheep followed. When Kerkorian realizes his mistake (assuming he doesn’t get spectacularly lucky), only bottom feeders and financial scavengers are going to be buying, so GM won’t be worth anything, even more so. Could that be when the Chapter 11 papers get filed?

    Sorry for changing the subject.

  • avatar
    liquidflorian

    Maybe Kirk was trying to sell off one of the brands? It’s ulikely GM would “break up the band” for cash, at least this early. We might have to wait until the start the embalming process before that happens. GM might be hemoraging, but I think they still have a lot left to bleed.

  • avatar
    DaveClark

    The guy most impressed with Ghosn is Ghosn himself. Yeah, Infiniti and Nissan have some better product offerings at the moment but the Titan ain’t doing much. The dealers don’t like the factory. And styling miscues (wack taillights & headlights) and crappy interior pieces may be a harbinger of more darts to come. Nissan might be interested in GM’s production capacity, but a good marriage needs more than one thing in common. I see Kerkorian getting stuck with a falling stock price. C’est la vie.

  • avatar
    tom

    My guess would be that Nissan would like to have some American production plants. GM obviously has too many as their market share declines by the minute, so that would give Nissan the possibility to get their hands on some of them without having to invest a lot of money in the first place (like Toyota). All it would take are some new machines and they would be ready to go.

  • avatar
    gbh

    There is no ‘saving’ GM in it’s current iteration. Period. This is no more negotiable than that the sun will rise in the east and set in the west.

    1. GM is $50B+ in the hole.
    2. GM paper is sub-junk rated – for good reason.
    3. GM market share goes one way – down.
    4. GM has too many overhead staff positions.
    5. GM has too many overpaid overhead staff positions.
    6. GM has too many line employees.
    7. GM has line employees that get paid 3 times what the job is worth.
    8. GM has little, if any exciting product.
    9. GM has little, if any, competitive product.
    10.GM has absolutely no product in the pipeline that improves either 8 or 9.
    11.GM has no cash to even keep it’s product as far behind as it currently is.
    12.GM has (mostly) stone-age production facilities in the US.
    13.GM has too many lines.
    14.GM has too many dealers.
    15.GM has too many dealers and lines cannabalizing each other.
    16.The only thing Wags can find is a way to save a dime.
    17.Saving that dime will cost GM ten dollars in the near future.

    GM would have to magically regain 40%+ market share and have record profits quarter after quarter, for many years…

    JUST TO GET BACK TO BROKE. With NO reinvestment or dividend paid on one penny of ANY of those profits.

    This entire dog and Ghosn show is merely PR for the ill-informed and P&L challenged.

    The only way to ‘save’ GM is to kill it in chapter 7/11 and address all of the aforementioned issues.

    As well as about 50 more.

  • avatar
    Bubba Gump

    Kinda goes like this
    Kerkorian: Hey Ghosn I gots a deal fer ya, since yer movin to Tennessee we gots a little factory there thatd goin off line soon (insert Spring Hill here) I can probably get that kid Rick to peddle it to you on the cheap. You give em a little cash, and it’ll make me look like a hero and the stock price will jump so I can bail outa this deal, with a little extra jingle in my pocket.

    Ghosn: K so whats in it fer me.

    Kerkorian: Well youll get a almost new plant and a whole slew of employees that’ll jump to work for you so they don’t have to move. You’ll get to build sentra’s there and you’ll look like a hero. Then Nissan will reward you with a truckload of stock options and I’ll come over and buy a wad of Nissan stock so you can cash in and get yours to.

    This work for you Robert?

  • avatar
    Bubba Gump

    Its not about synergy its about spinergy!

  • avatar
    chops

    I think the WSJ nailed it a few weeks ago in their analysis. Kerkorian wants to hold Rick’s feet to the fire. The WSJ reports that Kerkorian wants to get Ghosn in front of the board to explain how he set, and met targets. It’s all about accountability, and as Farago has pointed out numerous times, Rick will not commit to any numbers or dates. This kind of wiggle room staves off the board from taking action against Wagoner, and you can be sure it pisses of Kerkorian to no end. So why is Ghosn playing along? Only he, the Captain, and York know for sure what promises were made,
    but you can’t blame it all on Pumping Ghosn’s ego, though I’m sure that had some appeal for Ghosn.

  • avatar
    nweaver

    Why CAN’T we blane it on Ghosn’s ego? There’s no rational reason why Renault/Nissan would benefit from sinking any $$$ or effort into GM.

    But he’s not a sucker, its now clear that this is really costing him nothing: a couple days of distraction overall, since he’s now made it clear that there will be no money on the table. He’s gotten his ego stroked bigtime, without the cost or commitment.

  • avatar
    brifol5

    This is my first post ever to a car blog so go easy on me….

    Has anyone ever thought that the miraculous turnaround of Nissan isn’t what it appears to be? Or that it is losing steam? Perhaps Ghosn is looking jumping ship to GM before he can be blamed for any failures at Nissan.

    And if GM fails on his watch, he has lots of folks to blame.

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