GM scraps talks with Renault chief

NEW YORK - General Motors has abandoned talks about creating a global alliance with Renault and Nissan, thumbing its nose at its largest shareholder, Kirk Kerkorian, and promising a painful go-it-alone restructuring.

Kerkorian, who has amassed a 10 per cent stake in the world's largest car manufacturer and got his own man on to the board, forced GM's chief executive, Rick Wagoner, into negotiations about a tie-up in July, in the hope that the three companies could save billions of dollars in annual running costs.

But after a board meeting earlier this week, Wagoner called his opposite number at Renault, Carlos Ghosn, yesterday to say they were too far apart on the merits and the potential structure of an alliance.

In particular, Ghosn had been resisting GM's demand that it be paid an upfront fee of about US$1 billion ($1.5 billion) for the deal to go ahead.

Renault and Nissan said that both sides had accepted that there could be significant cost savings from an alliance, which analysts believed would come from squeezing suppliers and sharing common technologies. However, they disagreed with GM over how big the savings might be, and which side would reap the most.

"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. Renault and Nissan consider that the principle of compensation is contrary to the spirit of any successful alliance," they said.

Shares in GM initially fell almost 3 per cent in the wake of the announcement, while those of Ford jumped 4 per cent.

- INDEPENDENT