Sunday, November 05, 2006

Nissan, Renault stock rise after GM alliance talks called off

Thursday, October 05, 2006
Nissan, Renault stock rise after GM alliance talks called off
Carl Freire / Associated Press

TOKYO -- Shares of Nissan and Renault rose Thursday as investors reacted with relief to news that General Motors called off talks on possibly creating a three-way alliance.

The three-month-long talks came undone as Nissan Motor Co. and Renault SA of France declined to pay a premium for reaping what General Motors Corp. said would have been a disproportionate share of the benefits, according to a joint statement issued by the companies.

"We've somewhat expected the outcome so we just take it as is," Nissan Chief Operating Officer Toshiyuki Shiga told public broadcaster NHK. "A deal like this is difficult unless each participant is positive about an alliance as a benefit."

Investors and analysts had worried that a tie-up with GM, faced with towering health care costs and struggling to turn around its business, would burden Nissan and Renault, which hold stakes in each other.

Nissan's stock jumped on the news, climbing 3.47 percent to close at 1,369 yen ($11.65).

In Thursday morning trading in Europe, Renault's share was up 1.7 percent to 90.75 euros ($115.33).

With the proposal out of the picture "a risk is gone," said Shotaro Noguchi, an analyst with Mitsubishi UFJ Securities, allowing Nissan to concentrate on its own business and rebuilding falling sales in Japan, North America and Europe.

"The market never believed anything was going to happen anyway, so it's hard to say it should be disappointed," said Kurt Sanger, an analyst with Macquarie Securities in Tokyo.

GM, the world's largest automaker, lost $10.6 billion last year, shuttering plants and has been steadily losing market share to Asian rivals. But last quarter, if not for restructuring charges, the company would have logged a hefty profit -- proof, management says, that a turnaround is under way.

Renault owns a 44 percent stake in Nissan, which in turn holds 15 percent of the French auto maker.

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