Monday, July 24, 2006

Alliance would give Ghosn muscle for the big leagues

Friday, July 14, 2006
Daniel Howes
Daniel Howes: Alliance would give Ghosn muscle for the big leagues

It's Carlos time.

Ghosn, that is, the CEO of Renault SA and Nissan Motor Co. who's scheduled to meet General Motors Corp. Chairman Rick Wagoner today and draw the broad parameters to study a potential three-way alliance of the automakers.

And if Ghosn's media blitz Thursday is any indication, he'll make a plausible case. He'll say this isn't about control, it's about finding solutions that make sense. He'll say this isn't about the Franco-Japanese hybrid fixing GM's problems, it's about GM fixing itself with whatever help the other two might offer.

He'll say, judging by his rhetoric, that he isn't angling to replace Wagoner atop GM or craft an organization -- if it ever gets that far -- that makes him Le Big Dog, no matter what it says on his business card.

He'll say that none of this would make much sense if the automakers don't own stakes in each other to prove their intent. He'll say he isn't talking to any other automakers about a potential alliance (i.e., Ford Motor Co.) -- at least not yet.

Seeking the Big Deal

Make no mistake: Ghosn's on a mission. Why wouldn't he be? His Nissan, a profitable industry darling the past few years, is stumbling, particularly in the all-important United States. Market share is down. Quality is suspect. Recalls are up -- and this is a Japanese automaker.

Renault, his latest rehab project, is profitable, too, but the vast chunk of its business is mired in slow-growth Europe. It needs broad roads into places like China and the United States. It needs the economies of scale from partnering with GM's Opel unit in Germany, a prospect certain to enrage European unions.

This guy clearly gets where the global auto industry is heading, but you get the unmistakable impression he knows he may not have the muscle to play when he gets there. Especially not with a beast like Toyota firing on all cylinders or a potential beast like GM (finally) showing signs of getting its act together.

He wouldn't be in Detroit otherwise, would he?

Study the track record

Ever since news of this proposed tie-up broke at the beginning of the July Fourth holiday, industry and Wall Street types have delivered all sorts of good reasons why a GM-Renault-Nissan Global Motors doesn't need to happen.

Fair enough. But there is one reason this alliance will get very serious consideration by GM management and, especially, its directors: Ghosn's record at Renault-Nissan and how sharply it contrasts to GM's over the same seven years.

Nissan in 1999 isn't GM today or just a few years ago. Yes, Nissan and Renault get government support for key fixed costs like pensions and health care. Yes, GM operates globally -- in purchasing, product development and manufacturing.

But it struggles to do what matters most -- make money, unlike Ghosn's companies.

Without the surplus cash that comes from profits, GM can't keep outrunning the competition. The only question is whether an alliance might get it where it wants to go sooner.

Daniel Howes' column appears Mondays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or Catch him Fridays with Paul W. Smith on NewsTalk 760-WJR.

© Copyright 2006 The Detroit News. All rights reserved.


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