The series of announcements of talks between GM shareholder Kirk Kerkorian and Renault and Nissan executives about taking a stake in the troubled North American market leader are without doubt a boost for GM.
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It is good to see serious industry players prepared to consider whether the group has a long-term future, despite the track record of the last 20 years.
In some ways GM’s current position is similar to that of Nissan when Renault took a stake in the company in 1999. The company has made real progress on turning around its products and tackling some of its underlying problems. The quality and reliability of GM’s vehicles have improved significantly over the last three or four years, and are better than their reputation. Presentations by GM management suggest, fairly convincingly, that this improvement will continue.
GM has addressed a significant part of its legacy burden with its successful workforce reduction plan. GM executives recognise that they are running too many model lines, most of them unprofitable, and that further product and platform rationalisation is necessary. Above all, the key constituencies in the company have slowly but surely come to recognise the significance of the crisis the company is in.
This could enable Renault and Nissan to give the company the final push to make the difficult changes that are necessary – and bolster the forces of change within GM, and increase the company’s capacity to see out the two to four years needed for the turnaround – not least to give suppliers continued faith to invest in supplying parts to the group.
But to have the power to make sure that that happened, and to enable the management changes that are required in the next step of GM’s turnaround, a 20% stake looks too small. Renault and Nissan are vulnerable to potential backsliding by GM as the immediate pressure on the company is eased.
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