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The General Studying Possible New Allies

Saturday July 15, 2006

GM has decided to take 90 days in order to carefully study the possibility of a proposed alliance between itself, Renault SA and Nissan Motors. The decision was made during a meeting held in Detroit Friday, where the CEO of GM, Rick Wagoner, met with the CEO of both Nissan and Renault, Carlos Ghosn.

During yesterday’s meeting, the two discussed the possibilities such an alliance could bring to each sides, such as the pooling of parts purchasing or platform sharing, in hopes that they could evaluate the benefits that each potential partner could bring to the table for the other.

“We had a good discussion today, and are looking forward to having our teams work together to explore our ideas,” Wagoner and Ghosn said in a joint statement.

An interesting note about Kerkorian’s initial proposal to the board of GM, however, is that it mentions Renault and Nissan both taking a substantial stake in GM, yet there does not seem to be any mention of GM taking such a stake in neither Nissan nor Renault.

Many analysts also remain skeptical of any alliance which may be formed, mostly saying that the cost reduction effect that they are hoping to get from this may not actually happen and that this may only serve as a distraction to both Ghosn and Wagoner, all during the worst possible time for both General Motors and Nissan-Renault. Add to that the fact that GM is seemingly in the middle of their own turnaround and you’ve got a precarious situation that can’t help but make you wonder: What are they thinking?

However, both sides continue to reassure us that there will only be a deal if there truly are benefits for everyone involved.

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