My first reaction to the news about Renault, Nissan and General Motors was, ‘Has Ghosn started to believe his publicity?’ Sure, it must have been flattering to be asked to lunch with Kirk Kerkorian and Jerry York, men who have made a substantial living, thank you, from their plunges into the shareholdings of major motor companies. Even a man whose ego is massaged as devotedly and often as Carlos Ghosn’s would find that an intriguing concept, writes Karl Ludvigsen.

The native of Brazil has rightly been hailed for his success in reviving Nissan. He achieved a major turnaround for that struggling company. He became a hero in Japan, achieving the ultimate kudos of being starred in comic books. You don’t get higher recognition than that. Now he’s keeping an eye on Nissan while turning his attention to Renault with the aim of improving the French company’s margins. But General Motors as well? Only a man who believes he’s really as good as they say he is would dare to take that on.

Ghosn found plenty of low-hanging fruit at Nissan. One was its traditional ring of tied suppliers; it took the arrival of a foreigner, a gaijin, to take the unprecedented step of shattering that ring to allow access to lower-cost suppliers. The alliance with Renault gave Nissan’s people new insights into the prices being paid for purchased parts; especially in Europe they were surprised to discover that Renault’s buyers were striking significantly better deals than Nissan’s.

Thus I’m not surprised to see “parts procurement” on the list of topics that a Japanese newspaper says the Renault-Nissan men would like to discuss with GM. The prices paid for parts are among the industry’s most closely guarded secrets. I should know; I was asked to research them often enough. I can just imagine the reaction of GM’s straight-taking purchasing czar Bo Andersson if he were asked to open his books to a bunch of French and Japanese. For better or worse, thanks to a certain Mr. Lopez, GM is as savvy a purchaser as any auto company in the world.

Speaking of purchasing, General Motors doesn’t need to be bigger than it is to gain additional economies of scale. A company making more than seven million vehicles a year has access to all the cost-reduction tools that the industry has to offer. It doesn’t need to be part of a group making more than 14m vehicles annually in order to obtain scale economies. I can see that it would be appealing to Renault and Nissan to have access to GM’s buying power, but the reverse is decidedly not the case.

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Of course, managing that 7m-plus production is another matter. GM has struggled with this in the most public way possible, casting aside one plan after another in its effort to co-ordinate its global activities. Now, however, it seems to be getting a grip. The idea of linking Opel with Saturn is a good one. Opel’s Hans Demant says that ‘it makes sense, in order to make the Saturn brand more emotional and more successful until Saturn itself is able to introduce attractive new models.’ This suggests that the Opel/Saturn link could be a temporary one. Even as such it could help revitalise the customer-friendly Saturn proposition.

In just-auto I’ve also praised the way GM is making use of its Korean arm. Thanks to the way Daewoo’s product development was transformed by the energetic Ulrich Bez, that company is well able to generate new product not only for the global Chevrolet brand but also for other GM divisions. Under Nick Reilly GM Daewoo has become an important source of fresh designs for GM in a remarkably short time. The General may even regret not having taken over some of Daewoo’s other plants in Poland as demand for these new small Chevrolets grows.

Interestingly, GM’s success with Daewoo has been achieved with a shareholding of only 48.6%. It was bumped up to 50.1% only at the end of last year through the purchase of Suzuki’s stake in the company. This is a salutary reminder that Renault-Nissan is not the corporate monolith that many seem to suppose. Renault owns 44% of Nissan while the latter has a reciprocal 15% of Renault. In other words, if improvements have been achieved through their alliance — and they have — it’s not the consequence of a merger, DaimlerChrysler-style. Rather it’s the result of a willingness to work together constructively to share components and platforms while maintaining strong brand competition in the heart of the auto market. The same applies to the co-operation between Toyota and PSA Peugeot-Citroën.

Meanwhile GM has been making headway. Those turning up their noses at its technology may have overlooked the recent launch of its dual-mode hybrid drive, which is so good that both BMW and DaimlerChrysler want it enough to have set up their own development centres to adapt it to their products. As well, the General has finally bitten the bullet by downsizing its North American production and workforce, struggling to get capacity in line with sales. Then when sales improve their manufacturing efficiency — and profits — will skyrocket. That’s the unique leverage of the car industry, the leverage that Ghosn exploited to put Nissan back in profit.

I wonder if Carlos Ghosn was surprised to see the Kerkorian letters to General Motors made public so soon after their June talks in Nashville. After all, the whole matter was only a germ of an idea. French industry minister François Loos gave the impression that he was the last to be informed about the idea when he counselled ‘enormous caution’ in dealing with ‘the United States, an immense market, a complicated market’. As the holder of 15.3% of Renault and 18.8% of its voting rights he has a need to know. Memories in France are still vivid of Renault’s costly adventure with American Motors.

I’m in agreement with DaimlerChrysler chief Dieter Zetsche, who remarked that ‘Sometimes the news itself is already the purpose, not necessarily leading to a result.’ Of course Kerkorian made his letters public. His 9.9% shareholding in GM gives him every reason to stir up interest in a possible deal, no matter how specious. The markets obliged with a Pavlovian response.

GM’s board has acted appropriately in authorising a GM management team to meet with Carlos Ghosn to discuss the options on the table. At the same time it has rejected the Kerkorian/York concept that the board itself should form a subcommittee, backed by outside advisors, to assess the Renault/Nissan proposition. The board should get involved, but only after GM’s management has prepared its view on the potential risks and benefits of co-operative activities.

Who’ll be on the Wagoner team? I’d be surprised if Bob Lutz were excluded, as he was in the talks that led to the DaimlerChrysler merger. Bob will bring a lot of experience to the table along with a knowledge of French that will keep the other side honest in their talks amongst themselves. Another GM man who should be there is Carl-Peter Forster. The former BMW production chief who now heads Opel and GM Europe is running the operation that will either benefit greatly from a relationship with Renault/Nissan or be decimated as a consequence of it. If he and his people aren’t involved the talks will be a sham at best.

At the end of the day, a Renault-Nissan initiative and the menace of ‘Le Cost-Cutter’ arriving at the Renaissance Center may be all that’s needed to encourage GM’s many stakeholders, in business and government, to get firmly behind the General’s plans and actions for recovery. Britain’s indigenous carmakers enjoyed no such support and either collapsed or were gobbled up. It’s time for Americans to show they’re made of sterner stuff. And that goes for you too, Rick Wagoner!

– Karl Ludvigsen

Karl Ludvigsen is an award-winning author, historian and consultant who has worked in senior positions for GM, Fiat and Ford. In the 1980s and 1990s he ran the London-based motor-industry management consultancy, Ludvigsen Associates. He is currently an independent consultant and the author of more than three dozen books about cars and the motor industry, including Creating the Customer-Driven Car Company

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