An unlikely auto alliance

Amy Scott Jul 6, 2006

KAI RYSSDAL: On the losing side today: General Motors. Shares in the carmaker fell about 0.7 percent. Investors are a little anxious. There’s a big board meeting tomorrow. Directors are set to talk about Nissan and Renault, and whether GM should form some sort of alliance with them. Save money on parts and design. Word has it GM CEO Rick Wagoner is opposed. But he’s apparently taking it seriously. And, Marketplace’s Amy Scott reports, that’s more than you can say for some analysts.

AMY SCOTT: Dave Healy says he has a pretty good idea how tomorrow’s meeting will go. He’s an auto analyst with Burnham Securities.

DAVE HEALY: If you had a stenographic record of it, it would be, you know, “Break for Laughter, laughter, laughter.” But you know they have to take it seriously from a public point of view. So they’ll wait a decent interval and then reject it.

Why reject it? There’s the precedent. GM recently watched a few billion dollars go down the drain when it joined up with Fiat, then had to buy its way out when the deal failed. Nissan CEO Carlos Ghosn is celebrated in Japan for turning that company around. But industry consultant Dennis Virag says he’s still got work to do. After a series of recalls and other problems, Nissan’s US sales dropped 19 percent last month.

DENNIS VIRAG: Nissan is a troubled company. GM is a troubled company. It’s not good strategic sense to put those two companies together.

Some are willing to look on the bright side. Bob Schulz with Standard & Poors says all three companies could save by sharing parts and technology.

BOB SCHULZ: There’s plenty of reasons for all theses companies to want to reduce their costs, and that’s why we’re saying we could see some positives out of an alliance if it led to lower costs, but it would not necessarily address a couple of the big issues that they’re still facing.

Issues like GM’s enormous retiree healthcare costs. And a lack of enthusiasm for its products. Analysts say GM is making progress on its own turnaround path — 35,000 workers just agreed to retire early.

It’s now up to the board to decide whether to welcome some help or keep going on its own.

In New York, I’m Amy Scott for Marketplace.

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